How to Save a Million Dollars for Your Retirement

According to TD Canada Trust, if you start at age 25 and contribute monthly to an RRSP account that earns a 6.8 per cent annual rate of return, compounded monthly, you'll have a million dollars for your retirement.

Every month, you must save, depending on your age:

• 25-30: $100
• 30-35: $250
• 35-40: $500
• 50-65: $750 

Analysing this savings strategy, financial writer Alision Griffiths points out in today's Toronto Star "Me and My Money" column that saving this amount could be very difficult for many people.

Griffiths says that according to statistics, 22 to 34 year-olds have less income than in previous decades and higher debt due to the increased cost of education and higher cost of living.

She points out that middle-aged parents trying to help their young adult children with education costs are facing increased debt as many turn to using lines of credit.  In addition, "boomerang kids," who return to the home (and grown children who remain at home) deplete their parents' savings potential.

For adults in the 50 to 65 age group, Griffiths says saving $1000 a month might be possible "if you've got a good job, aren't still supporting children or looking after elderly parents and have little or no debt. That's a lot of ifs."

That's not to say you shouldn't try.  Griffiths and her colleagues offer lots of ways to keep within your budget and increase your savings on the http://www.moneyville.ca/ site.  Check it out.

Shopping and Saving Money

• If there is a certain item you need and have been waiting to buy on sale, subscribe to sale alerts from the store's website.  Unsubscribe after you've purchased the item, or mark the e-mails as "spam" so you're not tempted to buy more.
• Scan sale flyers from the newspaper or online.  Make a list of items on special that you need.
• Go only to those stores that have advertised sales on the items you need--and when you go, buy only those items (leave the credit card at home and pay cash.)
• Resist "dropping in" at nearby stores.
• If you tend to pick up things you don't really need on impulse, delegate shopping to another member of your family who will "stick to the list".
• Do an online search for a money-saving promotional code before ordering from a website.
• When shopping online, save your chosen items in a "wish list".  Return to the site later--do you really need these things?
• Put a "no junk mail" sign on your mail box so you're not tempted by advertising flyers.
• Throw unsolicited catalogues in the recycling bin--don't be tempted to spend money you're trying to save.
• When shopping for sale items at retail stores, look only at the front (where sale items are placed to tempt you in) and at the back (where clearance racks might be).
• Don't try on anything you can't afford.
• Don't buy sale items just because they're cheap.
• If you're on a strict budget, leave your credit and debit cards at home. Pay in cash.
• Some people "need" to "go out and get something new" to feel good--go get a library card, and borrow a new book, magazine or DVD every week, for free.

How to Save Money

My parents paid off the mortgage on a nice home in the suburbs and sent three kids to university on a factory worker's income. This is how they did it:

• Determine a family budget. Add up all sources of income. Add up all expenses (groceries, mortgage/rent payments, utility bills, entertainment expenses, medical/dental expenses, charitable donations, transportation (public transit, car maintenance and insurance, gas), etc. Subtract expenses from income. The money you need to pay for housing, utility and other bills goes in a chequing account. Withdraw only the what you need for daily expenses (food, spending money, transportation) each week and deposit the remainder into a savings account.
• Pay credit card balances in full each month.
• If that's been hard, put credit cards away and pay for expenses in cash. Put the grocery money in one envelope, transportation money in another, spending money in a third. Once an envelope is empty--that's it, no more till next week.
• Do not buy "on time."
• Save for what you predict you will need. If you will need a new car in five years, or you want to go on a vacation later in the year, figure out a savings strategy and pay in full when the time comes. Or don't buy a car or go on vacation.
• Keep the equivalent of 3 months mortgage/rent payment plus utilities in a savings account in case of emergency. Ideally, you should have 6 months worth of savings for all expenses in a high-interest savings account.
• If you have a pet, save for unexpected accident/illness veterinary bills. $50 a month might not even be enough.
• Once you have enough money to support your family for six months in a savings account, don't touch that amount. Start putting savings into retirement savings plans and  education savings plans for your children.
• Shop with a purpose and buy only what you need. Make lists, use the weekly flyer and get what's on sale.
• Replace "recreational" shopping with other forms of entertainment. Replace going to the mall with going to the park or the library.  Replace "emotional" shopping (buying things to make you feel better) with something that might actually make you feel better than going into debt--visit a friend, clean out a closet, take a walk, do a favour for someone who is worse off than you.
• In order to have food on the table and money in the bank, think hard about ways to economize. What can you live without? Cut out or cut down on everything that will make you unhealthy first: cigarettes, alcohol, and junk food.
• Prepare your own food. My parents didn't "stop for coffee" or buy us drinks when we were out. Thirsty? Mom would say, find a water fountain (hard to find today!) or wait until you get home. Take refillable water bottles.
• Support public education in your own community. Send your kids to local schools and government-funded colleges and universities. Working in the summer to save for college education helps kids take their schoolwork more seriously. Our parents paid for the first year's tuition. We knew living away from home, in residence, was out of the question. We all worked summers and part of the year to pay for our expenses, books and tuition.
• Trade services if possible--I once looked after a toddler in my home and in return, his dad installed my new kitchen in his off-hours.

Can You Use Regular Gas Instead of Premium and Save Money?

Amy called home to ask if she could fill up the car with premium gas--they were out of regular and mid-grade gas at the pumps. The station was offering premium for the same price. Norm told her to go ahead and give the car "a treat." 

But according to one Honda dealer's website, your car doesn't need to be "treated" to premium gas if it's running smoothly. If your manual recommends using a higher grade but higher octane gas is not required, and your car or truck less than ten years old, you might be able to save money by using regular gas. 

The dealership's online article explains: Virtually every expert – even those from oil companies and auto manufacturers – say that using Regular will not harm engines, but you’ll probably not get the ‘advertised’ performance. In other words, you may add a second to the zero-to-100 km time a reviewer said you should expect from your car. Again, using Regular gas will not damage the modern engines of most of today’s cars. Read Parkway Honda's entire article, here.

Simple Ways to Save Some Money

1. Save for what you want.

Instead of buying on credit, save until you can afford to buy it. 

2. Budget for small things too and pay in cash.

Put a small amount aside in an "envelope" for weekly incidentals, like coffee, gum or a lottery ticket. Once it's gone--that's it. Don't use your debit card or spend more cash.

3. Put change in a "jar."

Not a piggy bank--get your kids to decorate an actual jar, or do it yourself. When full, make a deposit at the bank. Or if you're doing this virtually, whatever you don't spend at the end of the week from your reserved amount in #2, tranfer to savings or an investment accoun.

3. "Take-out" food from your freezer.

• Make food basics like salad dressing, croutons, soups and pancakes. Use oil on your fingers or a basting brush instead of buying tinned spray-on oils. Check the Dollar Store for inexpensive kitchen items. Wash and tear lettuce bought in a bunch instead of buying bagged. 
• Cook double and freeze portions or entire meals to use another day: take-out meals from your own freezer.

5. Never buy gas during the hottest part of the day and make a plan.

• Fll up at night, when you'll lose less to vapour expansion and evaporation. When you do use the car, plan a route and do all your errands in the most cost-effective way, all in one trip. Don't grocery shop more than once a week, for example, unless you can walk.

6. Cancel or cut down on household help services and memberships.

• Snow shovelling, lawn-mowing, gardening, and heavy cleaning can help keep you in shape. Make them part of your regular exercise routine. Get active doing your own work and save the cost of these services plus the cost of a gym membership.

7. Cancel your premium cable service, read more, use the library, exchange with friends.

Get or renew your library card--and start going to the library once a week--walk or bike there as a family. Sign your kids up for programs and find out about the free courses your library has available for you. Exchange books you own with friends and check out free books available online--unless you also want to cut down on screen time.

8. Socialize More (at home)

• Dig up your Scrabble, Monopoly, or Twister game, or get a nostalgic old game at a garage sale. If you don't have a board game, play Charades. Invite friends or another family over for a a game or movie night.

9. Fix Things

• Reduce trash, try to fix what's broken and could be still useful, instead of buying new, if this makes sense.

10. De-Tox

Get healthy and save a lot by cutting out alcohol or sweets or processed foods for 30 days.