I am proudly debt free now for 9 months (since January 2016).
With that accomplishment came a whole new set of planning and strategic tactics.
I had dreams of building my savings accounts while I was still paying off my debt. I wanted to be increasing how much I could save each pay and was eager to get that financial position.
One of the first things I did after everything was paid off, well, was double/triple check that they actually were haha. It’s a weird feeling knowing you’ve done it and you doubt it for a long while so it’s only natural to look through your numbers again.
Then once that reality sets in, the planning starts.
To build up your savings, it starts with a plan
The planning shouldn’t just start when you have become debt free, if you can manage it, there is nothing wrong with working at building your savings while still paying off your debt. I still made monthly contributions to my RRSP’s while still paying off my debt, but knowing once the debt was paid off, that I wanted to increase that amount. Hence the planning; how much to increase it by?
I have an Emergency Fund/TFSA, RRSP’s and a Mortgage. I have goals of building my RRSP and TFSA contributions and paying off my mortgage.
First; I set up my goals. For my mortgage, one of my payment options is a lump sum payment once a year. I have never utilized this option while paying down my debt. I have mapped out that I would like to make a lump sum payment of $5,000 by December. I had planned to start this with my first pay in February. Taking the goal amount of $5,000 and dividing it by 11 months, I get $454.55 per month that I need to put aside for the lump sum payment. Divide that number again for each pay (I am paid semi-monthly) and that comes out to only $227.28 I need to set aside on each pay into a separate savings account in order to make a lump sum payment in December.
I did the same with my RRSP’s and my TFSA. I knew I wanted to increase my monthly contributions and I knew I wanted to have a goal of contributing at least $5,000 in to each by the end of the year. Remember these are just goals. Something for me to aim towards.
After working on my monthly budget and seeing how much money I am left with each pay, It turns out I am not able to meet the goal of $5,000 contributed to both based on what I have left over after all my house bills are paid and groceries. I had to choose one or the other. And that’s is ok with me, even if the goal for each becomes $3,000 each, it’s the fact that I am still contributing more each month.
I made a plan to do so and I am following through.
That is the point. Just because I can’t contribute $5,000 doesn’t mean I can’t next year. And who’s to say it won’t happen this year, I may get a second job, I may sell a few household items to supplement my groceries and therefore that extra money can be put towards my savings or who’s to say I don’t get a raise. In any event, that is why I make a plan and I work on my monthly budget each week to see if I am still on track or if I am ahead of the game.
It’s still exciting knowing I am following through with building my savings, no matter how small.
When I first opened an RRSP, my contributions were $100/month ($50 per pay cheque). Over the years, I have slowly increased that and it’s just like you might have read before, when it’s automated withdrawals, you don’t even notice the amount missing from your account and it’s being put towards your future.
How do you save? What planning tactics have you used? What method works for you when deciding to increase a payment or pay down debt and build savings?