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The Million-Dollar Retirement - And how to get there

Why it pays to start saving for retirement now

It seems crazy to think about saving for retirement when you’ve only just started your career, right? After all, it’s so far away. And won’t the Canada Pension Plan look after you? Sure, if you think you can live comfortably off the average monthly CPP cheque of $685.11.

 

Saving while you’re young gives you a great head start because of compound interest. This is where you earn interest on the money that you deposit in your savings account, plus you earn interest on the interest.

 

Regardless of what you’re saving for a new home, setting up your own business, travelling or a comfortable retirement, saving early gives you a big advantage. Let’s take a look at some figures.

 

How much you need to save to make it to a million

To reach the million dollar mark in 40 years, with no current savings and assuming a conservative return of 5% (considerably less than Canadian equities typically earn) you would need to save $655.30 per month.

 

Oh, it can wait, you think to yourself. I can save when I’m earning more. That’s true, you can. But if you wait 10 years before you start saving, that monthly amount almost doubles to $1,201.55. So even though only a quarter of your total investment time has passed, you have to almost double your savings amounts to reach the same goal.

 

And if you leave it until there are only 20 years left before your retirement, you’ll need to save a hefty $2,432.89 a month.

 

Cut back so you can start saving

But what if you don’t have any “spare” money to save? Well, there are a number of simple but highly effective ways to reduce your outgoings, so you can put that money into your savings.

 

1. Make and take your morning coffee with you

Whether you love Tim’s or Starbucks, your morning cup of coffee can cost you between $15-25 a week. Make yourself a cup just before you leave and take it with you. You’ll save time lining up at the coffee shop as well.

 

Monthly savings - $60 minimum. 

 

2. Eat less junk food - take your lunch to work

Take leftovers or a sandwich for lunch - the savings can be substantial. Even allowing for the extra food you’ll have to buy at the grocery store, your savings could easily be $25 a week.

 

Monthly savings - $100.

 

3. Borrow for free instead of buying or renting

Your library is a great source not only of free books, but also comics, films and TV shows. With inter-library loan networks, there are tens of thousands of items available to you.

 

And online library services like Hoopla allow you to download eBooks, TV shows, music and movies to your mobile device, computer or TV.

 

Monthly savings - depending on your reading/viewing habits, at least $25.

 

4. Bundle - or get rid of - your home services

Shop around for the best deals for bundling - some providers offer packages for TV, Internet and home phone for as low as $63 per month. Or consider ditching your home phone and cable TV altogether. Rely on your cell phone and stream shows and movies through providers like Netflix or your library service.

 

Monthly savings - as much as $50.

 

5. Save on banking

The easiest saving is switching to a bank that doesn’t charge you exorbitant fees for banking with them. Depending on how many transactions you need, the big banks can charge you anywhere between $11-30 per month. Chinook Financial’s Regular Personal Account charges a monthly fee of only $2, with no minimum balance required.

 

If you are carrying credit card debt or a high interest payday loan, be sure you know all your options to reduce your interest payments, including our much more affordable alternative called the Cash Crunch Loan.

 

Monthly savings - at least $11.

 

6. Save when shopping

Loyalty programs can make for savings as big as 5-10% on your weekly groceries.

Digital flyer apps like FLIPP not only provide you with all the flyers from local retailers, they also tell you which stores offer the best deals on your grocery list.

 

And you can use the app to reduce your grocery bill when you shop at stores that offer price matching, like Walmart and No Frills.

Instead of paying full retail price for clothes, save up to 50% in end-of-season sales, or even more by shopping at thrift stores.

 

Monthly savings - at least $40 on groceries alone.

 

7. Negotiate when renewing your insurance

When car and home contents insurance come up for renewal, shop around and try and negotiate directly with the company for a better rate or try and get a better deal through a broker. Chinook Financial gives its members preferred rates for auto and home insurance, as well as travel and life insurance.

 

Monthly savings - $5-10.

 

Starting on the road to your $1 million retirement

 

None of these cost-saving steps are hard to do - they just require a little dedication and planning. When you add up all of these savings, you’ll have an extra $296 in your pocket.

 

If you save that every month in an account bringing you a 5% return, it will grow in value in 40 years to be worth $451,702. That’s almost half a million dollars just by making lots of small savings. Imagine how much you can build up when you start actively putting extra money into your savings account.

 

What are you waiting for?

 

As you’ve seen, time is on your side. If you start saving now, you’ll have a great chance of having enough money for a comfortable retirement. Book an appointment now with our Chinook Financial team - we can help you get on the path to your million-dollar retirement.