As Canadians, we struggle with saving money. A recent poll by MNP shows that 47% of Canadians plan to take on more debt to cover basic living expenses.
By taking on more debt, you can get caught in a “debt trap” that begins a vicious life-long cycle of struggling to make interest payments and being unable to save.
Let’s take a look at what categories Canadians are spending the most on, and I can show you how you can go after three big wins to save money and live better.
What are Canadians spending on?
It’s good to take a high-level approach and figure out what you are spending your money on. Knowing this will help you figure out the best way how to save money in Canada.
If you’re like most Canadians, you’ll be spending the most on the “big three” expenses, which are housing (29.2%), transportation (19.9%), and food (13.4%) Combined, the average Canadian is spending 62.5% of their money on these three things.
Let’s tackle the biggest expense and see if there are some “easy” big wins that you can try today.
Housing and shelter
Housing is by far the biggest single expense that Canadians spend, sitting at 29.2% for the average household in 2017. I’ve included some convenient ways for saving on your housing.
- Get a roommate: sharing living costs with someone else, whether it is a common-law partner or a friend, will cut down your costs drastically by up to 50%.
- Live further from the city core: downtown rent is usually a lot more, so try to live outside the core. Be mindful that depending on where you work, this might increase transportation costs.
- Look for a new place in the wintertime: Demand is usually lower because people don’t want to move in the winter, so homeowners have more trouble renting out their units.
- Negotiate when re-signing a lease: If you’ve been a good tenant, your landlord might not want to lose you. Try to ask for 10% less to start and see if they would consider negotiating down. It doesn’t hurt to try!
- Sublet your place: If you’re gone for a while, consider subletting your place so you can save on rent costs.
- Take your time and shop around: Take a tour of at least three or four places, and scour Kijiji, Craigslist or liv.rent to see your local rental listing for good deals.
- Watch out for hidden costs: Apartments should usually include all utilities except for electricity in their costs; however, this might not always be the case. Also, be mindful that a lot of apartments have move-in fees for booking an elevator, so be clear on that as well.
- Start a business: If you own a business and have business expenses, and have a home office, you can write off a portion of your rent, insurance, and utilities.
- Negotiate better mortgage rates: If you’re up for new mortgage rates, look outside of the big banks. Pit multiple mortgage brokers against each other for the best rates; they have access to hundreds of lenders and work on commission, so they are motivated to get you the best deal.
- Learn to use Airbnb: Whenever you need to leave the city, you could be using your home as an income-generating asset. It’s a must if you live in a high tourist area; you could be missing out on a lot of money!
- Buy below your means: Even though you’re approved for a maximum amount for a mortgage, it doesn’t mean you should take that amount. By buying lower than the maximum, you leave yourself some wiggle room to spend on other areas of your life.
- Put down 20% to save insurance: CMHC insurance costs are hefty if you don’t put down 20% of your housing. Try your best to save up the 20% down payment.
- Start a business – if you own a business and have business expenses and a home office, you can write off a portion of your utilities, insurance, property tax, and mortgage interest.
- Be careful with home renovations – Home renovations can end up costing way more than budgeted, and they don’t usually increase the value of your house by what you paid for it.
Getting from point A to point B is an area that I think many Canadians can cut down their costs drastically and without too much of a hassle either. To save money in Canada, look no further than these quick transportation wins:
- Know your cost per kilometre of driving your vehicle: Vehicle costs are surprising because it’s hard to see all the hidden costs. For example, in BC, if you own a used SUV, it would cost around 63 cents per kilometre driven. So if you’re making a 20-kilometre round trip for a total of 40 kilometres, that trip is actually costing you around $25.20 to make. It’s not just the fuel cost but the cost of depreciation and maintenance on the vehicle and insurance as well. Check your vehicle cost per kilometre using this estimator tool.
- Take your time to buy a vehicle: Don’t wait for your current vehicle to die before shopping for a new one, so you’re not too desperate.
- Negotiate insurance – if you live in a province where you can buy car insurance from a private provider, contact multiple brokers and shop around online for the best rates. There’s a big difference in price for the exact same type of product.
- Buy used, and look for good deals: The first few cars that I bought, I owned for over a year and sold them for at least the same amount that I purchased them for. If you buy new, you will not get even close to what you paid for since your car’s first few years of depreciation are the heaviest.
- Avoid buying premium fuel cars: Have you seen gas prices lately? Premium fuel is super expensive now!
- Aim for a three to a five-year-old used vehicle: The average new car loses between 20-25% of its value in the first year alone. By buying a car that’s a few years old, you can still not worry much about maintenance and have a relatively new car.
- If you must buy new: Be wary of when you are going to talk to the “finance manager” after the main meeting. He will try to sell you on overpriced warranties and undercoating and all the other little extras that you can get a lot cheaper elsewhere.
- Ease up on that lead foot: Avoid fast starts and speeding to minimize your fuel usage.
- Buy smaller: Smaller cars usually means they will cost less, consume less gas, and overall be less expensive to maintain.
- Car shares: Car shares such as Car2go are available in many cities at about half the price of a taxi.
- Public transportation: Map out the public transportation routes within your city, and take it
- Human fuel: If it’s not too freezing out, consider walking, biking, skateboarding, or whatever is your preferred mode of getting around to your destination. Not only is it free, but you will get a good workout as well.
- Don’t buy a vehicle at all: Many people use a combination of car shares, public transportation, and rideshares like Uber as substitutes for owning a vehicle, which will cut down your transportation costs by a lot.
- Electric for the win: Electric scooters, longboards, and unicycles have been gaining in popularity. Not only is it a cheap way to get around, but it’s super fun to use also.
One of the very best things about being alive is sitting down together at a meal with loved ones.
There is a lot of research that shows that eating food with loved ones is a huge indicator of good mental health.
Going to restaurants is a very social event, but it can also get pricey to go too often. That is why it is hard for many people to adjust their food habits. Another major factor is the convenience of eating out, as fast food is everywhere and easy to get to.
If you can overcome the convenience trap and find other ways to socialize, not only can you can save money, you can get healthier too!
- Figure out your per-meal costs: There’s no better way to save money than to open your eyes to how much money you’re spending. At a restaurant, with taxes and tips for lunch or dinner is at least $18-20 these days. Fast food is around $7-12 a meal now. Compared to prepping your own meal using ingredients from Costco, it’s about $2-4 a meal. That’s a huge difference that can add up to hundreds a month or more!
- Track food expenses: It is so easy not to pay attention to food costs. Figure out where you’re spending the most, and target that first. Consider using a mobile app to track.
- Use Costco or a similar bulk grocery store: Costco is hands down the cheapest way to get ingredients for food. Plus if you hate cooking, there are many healthy and amazing pre-made meals you can buy at Costco for very cheap. Try to make it a weekly or biweekly habit to go to Costco.
- Meal prep – You can prep meals for a few days at a time to make it super convenient to grab food and go. Not only do you save money by meal prepping, but you will probably eat way healthier also!
- Get the social aspect of eating together: Host meals or barbecues at your own place or at a friend’s place instead of going out to eat. You still get to socialize and save a lot of money also.
- Try to have fun cooking: Look up new easy recipes, take a cooking class, or try cooking with a friend.
- Invest in good Tupperware: If you’re going to be preparing more food for takeaway lunches and fast breakfasts, have good containers ready for you to use.
- Go to expensive restaurants for special occasions only: This has the added benefit of making it even more special. If you’re eating out every day, going to a restaurant loses its appeal.
- Substitute fun things for restaurants: If you really need to get out of the house and socialize, how about a walk outside or go to a cafe instead of a restaurant? There are a million other fun things to do than go to overpriced restaurants.
- Choose a cheaper alternative diet: More people are adopting a vegetarian or vegan diet, or a gluten-free diet. An added benefit of this is that vegetables are generally cheaper than meat, so you’ll most likely save money if you do this.
By being mindful of what you’re spending on housing, transportation, and food, you are well on your way to being able to save a lot of money. What area are you guilty of overspending?
For me, it was food that I was a bad spender on. When I figured out the best way to spend on food without sacrificing any quality of life, I started saving a lot of money.
If you’d like an easy way to save and invest, there are some automated savings apps that might be able to help.
As a constant traveller, there were other things I cut down on, such as spending less on bank fees and foreign exchange transaction fees. Hopefully, you can think of one of these big three spending areas that you can improve on also!