Jul 09 2008
Financial Obligations Part II…
So now Lisa and I smugly watch shows like Till debt do us part and Maxed Out (same idea…in fact they’ve had the same couples featured on at least one occasion), but we keep exploring ways to reduce our spending and make our money work a little bit harder, there is always room for improvement.
Immediately after the purchase of our home our savings were nil, no RRSP contributions, no emergency fund and no RESP for Jilly. Far from optimal, but we started small.
We set up Jillys RESP almost immediately (unfortunately I think we went the wrong direction with that, we should have gone self directed, instead we went with a “managed” fund) to let compound interest and the government “top-ups” work for us.
We started putting money away in an emergency fund, initially supposed to cover just one mortgage payment should there be a payroll error (then two mortgage payments, then a months worth of expenses). My previously mentioned “skimming” was divided into five accounts;
1) Emergency Fund (set to top out at about $3,000)
2) RRSP Account ($50 a paycheque to the retirement fund, not going to be able to retire soon, but it should be a bit of help come tax time…and ANY retirement savings are better than NONE).
3) Capital Expenses Fund (Not the emergency fund, but stuff we want to buy/fix and whatnot. No specific plans for it right now)
4) Jilly Fund - This is likely going to end up as seed money for a self-directed RESP.
5) Fun Fund (Not much point saving like a maniac if I can’t enjoy it. It was this fund that paid for my PS3, and it’ll be this fund that buys my next boomstick).
Conventional wisdom seems to suggest that you NOT start to save like this, as each account is only getting a little added to it each payday it takes a long time to notice any appreciable increases. This may harm the would-be savers resolve.
Where did the money come from? I quit smoking. I quit drinking 2 or 3 store bought coffees a day. I stopped eating a store-bought lunch each day, we stopped eating take-out food twice a week, we stopped ordering in food… the list goes on, but the gist is a few bucks saved here and there adds up just as quickly as money foolishly spent here and there does.
Quit frankly, if I was prepared to spend almost $10 a day on smoking, I’d feel much better about saving $10 a day for my daughters education. Another $5 a day that I didn’t spend on coffee can go towards my retirement… you get the idea.
I totally agree with your approach of making small investments now for big pay-off later. I was never good at that, however. For example, several times I passed on an investment of a couple of bucks that now would represent several hundred thousand dollars I’d have netted. That investment was a condom.
Keeping multiple savings-accounts worked better for me too. I found that if I just kept a list of the monthly balances in a spreadsheet, being able to refer to the increase over the long term was more satisfying than only seeing the last few months on the statements.
I went kayaking with my friend from Mutual last week, and she remembered her happiest moment there as the year-end when her final pay stub proved she had spent $0 in the company cafeteria over the year. Hmmm, frugal as fun…