You have to learn to walk before you can run. It’s cliché. I know. You’re cringing. But hey – it’s true. The state of financial education for young people in this country is abysmal. And for adults, it’s not any better.
Saving is a skill and there are varying degrees of skill level, but just like any skill, you have to learn it first before you can go pro. You can’t make a million before you make a buck. Likewise, unless you win the lottery, you won’t meet your retirement savings goal overnight while you’re still in university (and probably owing on your student loans).
But you can pay off your debts, you can build a healthy emergency savings account, and you can give yourself a worthwhile retirement without having to avoid worldly possessions. Money is not as mysterious and uncontrollable as it seems.
You’re in charge. But you’ve got to start somewhere.
I started with tea.
I, like many Canadians, started every day with a Tims run. If you are not Canadian, or if you’re a bad Canadian, Tim Hortons is the essential Canadian coffee shop and we are all addicted. Your Tims order says as much about you as your wardrobe, your friends, your home and any other vital life choice you could possibly make. So every weekday morning, I ordered a large steeped tea with milk. No muffin, no Timbits, just the tea, and I thought that was conservative.
But when you break it down, that’s $1.80 a day x 5 days a week = $9 a week. For – let’s say – 50 weeks of the year. I was spending $450 a year on water and a few tea leaves.
One day, after doing the math while waiting in the Tims drive thru, I just couldn’t take it anymore – 98% of what I was paying for was water, so why was I paying for it? I went out that day and spent $11 on a travel coffee mug, and $9 on a box of 216 bags of orange pekoe tea. At $0.42 for a tea bag, and water already accounted for in the budget, my annual tea spending dropped to $105.
I’m now saving $345 a year just by making my own tea in the morning. And that’s where my budget started.
Your savings goals need to be realistic. Don’t set yourself up to fail.
The lesson here is not that you have to give up your Tim Hortons coffee. This was something that I was easily able to give up, and now I actually prefer bringing my own tea to work in the mornings, so I wouldn’t go back to buying it every day even if I had the disposable income for it. If you are one of the many who need that coffee with every fibre of your being, in order to be able to even minimally function in your day, then don’t give it up. It won’t work, and when you don’t meet that goal, all other savings goals will seem that much harder to reach.
The point is, you need to decide where you can cut your spending in your budget – decide what your version of tea is. What can you do for less? What can you do without? The less you give away to Tim Hortons, to the mall, to restaurants, to your cell phone company, whoever… the more you have in your pocket.
Saving $1.80 a day may not seem like much on its own, but once you start trimming back some areas of your budget and saving small amounts here and there, it makes it easier to see the trees for the forest (2 cliches in one post – yesss).
Once you start to see your savings grow, you’ll get motivated to save more. It’s true, it’s a funny thing that happens somewhere in the back of your mind without you being aware of it. All of a sudden, maybe you’ll say no to that second beer at happy hour or you’ll think twice about buying just one more pair of jeans. That’s the beginning of the road that leads to being debt-free, to that trip you’ve been dreaming of, to the downpayment on your house, and then to retirement.
So go ahead. Take a step.