We are very close to a monthly passive income of 1,000 CAD. The question how to save money each month will always be relevant. It is not possible to receive passive income without savings — in other words, pay yourself first. Here are highlights of our savings:
1 We rent a townhouse.
The cost of renting, which is about 1,400 CAD, is far less than the cost of buying an equivalent townhouse in the area. A similar townhouse would cost around 800,000 CAD. Let’s say that after a down payment of 100,000 CAD, we would still pay more than 3,000 CAD monthly for the mortgage only. Therefore, mathematically, simply renting helps us to save more than 1,500 CAD each month. We also do not see owning a home as an investment. For us, it is a roof over our heads.
2 We do not send our kids to private schools.
Both of us graduated from universities without previously learning in private schools. Therefore, this is not a prerequisite for higher education. Additionally, there are cheaper alternative ways to boost kids’ learning, like additional lessons and private teachers.
3 We drive one car.
Although it may be more convenient to have two cars, we intentionally drive only one car and use public transportation. An extra car would cost at least 400 CAD a month, which is 4,800 CAD annually. This is a lot of money to be invested. It is almost half the amount of what needs to be invested to make you a millionaire in less than 30 years. Sometimes, for winter skiing, we rent a big 4×4 car for a few days, and it is still cheaper than having two cars.
4 We minimize our car insurance.
To make the insurance business profitable, the number of incidents that insurance pays for should be significantly lower than the number of clients who have insurance. The business is built around the idea that not many incidents will occur. We try to take advantage of this and increase our participation to the maximum allowed and keep all other options at around required minimum. This saves us about 200 CAD annually.
5 We do not eat out much.
Eating out is costly. One meal portion costs about 15 CAD, and so for two persons, this comes to 30 CAD. Eating out two times a week will cost 240 CAD monthly. Considering that there are always occasions like friends’ or family members’ birthdays when one might want to eat out, we try not to eat out on our own.
6 We budget our spending.
We use mint.com to check our spending and see where it could be lowered. We have set budgets for each category and keep an eye on them.
7 We buy vegetables from appropriate shops.
It is cheaper to buy vegetables from a local farm store, which is what we do. We do not buy vegetables and fruits from big stores like Costco.
8 We always compare prices when buying anything.
Thanks to online shopping, checking the available prices for any product is not complicated. A plug-in called Keepa is available for browsers that shows historical product prices on Amazon.
If the price of something was less in the past, it will most likely be reduced again. This is worth waiting for. Why pay more if you can pay less?
9 We do not carry any credit card debt.
Credit cards charge interest every day, which comes to 15–20% annually. We are not willing to pay interest in any case, which is why we pay our credit card debts in full every month.
10 We do not pay for bank accounts management.
Our checking accounts and all accounts are management-fee free. We keep a balance of 5,000 CAD in the TD Canada Trust to get a management-fee free checking account. Additionally, a certain amount needs to be kept in the accounts at our broker TD Waterhouse to eliminate account fees, which is what we do. The account management fees may be 30 CAD a month, amounting to 360 CAD annually.
11 We utilize VISA cash back.
Our primary Visa card is Scotia Momentum, which pays 4% cash back on groceries and gas and 2% on drug stores and recurring bill payments. Our overall annual cash back is about 1,000 CAD.
12 We cut our cable and eliminate our landline.
This can save you more than 60 CAD every month.
13 We buy used sports equipment.
Our family is skiing at a beginner’s level. We buy all our ski equipment from a second-hand store. We bought hockey and skating equipment at the same shop. Just the ski equipment saves us a few hundred CAD a year.
Importance of saving money each month
Without these savings, we would pay more than 26,500 annually. Investing this amount of money will make you a millionaire in less than 15 years. You can read about how this is possible here.
We will be more than glad to hear from readers about other ways to save.
Might not be an easy one to follow, however, if you choose at least 3-5 points, you will see how your budget significantly looks better every month and leaves you with more choices to invest and save.
In this style of life, you can buy a caravan and live there, it will be much cheaper for you or live with parents in their basement 🙂 (you’ll save 1000 CAD a month extra). Don’t use a car at all, will save another 400 CAD a month. Don’t eat outside and meet friends where from time to time you need to put some money for restaurants. Don’t travel, it will save a lot for you. Save everywhere you can and finally you’ll be the richest men in the cemetery.
Slava thank you for your comment. It is not about stop spending, it is about how to wisely spend money. Unfortunately, if you blindly spend any money, it will get you anywhere. Saving as a concept isn’t an easy task. It requires spending philosophy and basic financial education, in my opinion. I am pretty happy person i.e. without a luxury second car, restaurants every week and other savings described here. Here is my post about our last vacation where we joyfully spent previously saved money httpss://www.allincomestream.com/vacation-spending.
Whether people agree with my point of view or don`t, only we know better where to invest or spend. Be creative, learn facts and always look for better ways to improve your life. If our blog helped, we couldn’t be happier!
My philosophy is little different, when you concentrate yourself to save money from to be extra spent (decide to limit yourself everywhere it is possible), you don’t see the full picture how to increase the capital and continue to enjoy with those luxuries without wasting the time on some kind of applications and investigations.
Lets take simple examples:
1. you were so concentrated to save 26500 a year from spendings and decided to rent the townhouse, you probably saved 1500 every month by not buying it, but the same townhouse today is 1M+ and I’m not talking about mortgage that would be today lower by 50K+ would you buy it (BTW – your interest to bank would be probaby closer to 1400$ a month had you purchased that townhouse)
2. Knowing the situation in Vancouver and immigration proposal, you decided to give your money for private mortgages to help people to make money instead of doing it by yourself (one extra downpayment for preconstruction condo in the time it was much cheaper and affordable).
Those are only examples and with the situation today, with the crazy stock behavior and million of people laid off, I don’t think that companies will do easy pay dividends you based on and may take years for stock to be recovered at least to the level you purchased it.
Thanks for sharing Slava! Very interesting point of you, reminds me of my parents…
I hope you and your family are staying safe and healthy during this time!