The 1% Challenge-Are You Up for It?

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Want to Be in the 1 Percent?

We have all heard advice from many corners on the need to save more for our future. We all understand this!

However, the reality we soon face is that our budget is very tight, there seems to be no way to save more. That is why today I see literally hundreds of bloggers that discuss budgeting and strategies associated with it.

So I have been pondering a way for people to save more. There are only a few ways to improve your family’s bottom line, grow revenue or reduce expenses. For most of us our boss isn’t going to give us an immediate raise just because we want to save more. Also we are unlikely to take part-time employment on top of what we already do. So growing revenue is hard.

All CEO’s and their CFO’s will tell you that the best way to a better bottom line is managing expenses.  Should we adopt their approach?

We should however too often we try  to eat the Elephant in One Bite. We go from low or even negative saving (spending more than you earn via credit cards or lines of credit) to attempting to save or invest 10% of our income or more because we read that somewhere.

Few people have the necessary discipline to do this. Our spending is pleasurable, we enjoy it. To quit our spending ways and become a real saver is like an addict giving up drugs overnight or someone who smokes giving up cold turkey. It is extremely tough relapse rates are high.

So I want to propose a challenge to you. Itemize all your expenses, fixed, like bank loans, mortgage payments etc. on a piece of paper. Then list variable expenses, like eating out, smoking, alcohol, clothes, and the like.

Say your expenses add up to $5,000 per month. Your challenge, should you choose to accept it, over the next 30 days is to reduce your expenses by 1% or $50. It is a no-brainer you say, I can do that. Yes you can.

Now, I want you to open a TFSA account, invest the $50 in savings and create a new fixed expense “TFSA Savings” on your expenses line.  Have the deposit made automatically every month.

Now in month 2, reduce your expenses again by $50, 1% of the original level, remember you increased your fixed expenses for TFSA Savings by $50. This $50 will be a little harder to find but you will do it. Oh yes, increase your TFSA savings by $50 to $100.

Funny, by managing our expenses, we actually are also building assets.

This is the challenge. Continue it for 10 months, each time reducing expenses by $50 or 1%  and increasing your TFSA by an equal amount. Your basic expenses have reduced to $4,500 from $5,000 and we have established a new expense (savings)  TFSA savings of $500 a month.

This is how you eat the Elephant.

So, if you accept this challenge, share the methodology with friends, co-workers, your family and have a once a month accountability session. Heck you may even start your own blog I Am a 1 Percenter to record your exploits

Tools that You Will Need

  • A complete list of expenses, and a tool like Mint Canada help identify your expenses. However I encourage you to write the expenses down. Really sharpens your focus and may lead to a few ah ha moments.
  • Gail Vaz-Oxlade has some excellent tools as well. Find them here.
  • Attack the variable expenses first.
  • Open a TFSA
  • Create a strategy for how to save on expenses in the initial 10 months
  • Monthly accountability sessions with your spouse. Treat it like an appointment with your boss on a project. He/she will want to know about results, what will your answer be?

Money saving tips

  • If you  regularly have coffee  from Tim Horton’s or Starbucks reduce the consumption by 1 a day. This will save you anywhere from $9 to $18 dollars a week depending upon where you buy your coffee.
  • Brown bag your lunches like when you were in school. Takes a little effort but this can be a real money saver.
  • Like to read, join a Library, don’t always buy the newest best seller.
  • Entertainment is where people can save the most. Eat out less every week but maybe consider upgrading the dining the last week with your spouse at a better restaurant. You will still be dollars ahead.
  • Pay your Life Insurance  premiums annually versus monthly. There is about an 8.5% charge for the convenience of paying monthly.
  • Reduce your alcohol consumption.
  • Quit smoking. Not easy, but after 37 years I did. The cost of our vices are quite high. At the very least reduce your intake. Again if you smoke a large pack a day, exchange it for a small pack, 5 less cigarettes. Can you do this, sure you can!
  • Change  your cable subscription. Do I really need ROGERS VIP service or can I get away with a smaller package?
  • Follow my 24 hour rule. If you want to buy something, new dress, new car, new phone, or whatever always wait 24 hours. Most purchases are impulse, emotional, and by waiting 24 hours you can reduce the emotion and decide if this is a need versus a want.
  • Put your debit and credit cards away for 30 days. Pay cash. If we run out of  cash, we simply Interac it. These expenses are usually unaccounted for and unplanned. If we don’t have the cards we can’t slap on the expense. Look back over your last week, see what I mean?
  • Like to go to the show? Why not watch a movie at home with your cable provider’s On Demand Service. Saves a bunch. Plus no travel, no weather to contend with, cheaper munchies, a win all around.

This list is by no means comprehensive. There are many to find by Googling, on twitter and elsewhere. If you have a great money-saving tip please share it in the comments section below.

So are you in, if so, say so below? Share your progress with others in the comments section.

Related

Impulse Buying Can Be Hazardous to Your Financial Health

16 thoughts on “The 1% Challenge-Are You Up for It?

  1. “Say your expenses add up to $5,000 per month”. What sort of annual income are you assuming for this “typical” person? Sounds like your “1% challenge” applies only to the 1% of the population most people complain about. We don’t all make 6 digit incomes you know.

  2. Great article! I took on this challenge a few years ago with a different (but similar!) approach…save 1% of my net income/per month. It was easier than I thought it would be. I have been without cable TV now for 3+ years and have not missed it at all. I am fortunate to live close enough to work that I can go home for lunch, and I put a “48 hour” rule in place for purchases vs. your suggestion of “24 hours”. I also find it much easier to make monthly payments to my own TFSA’s for re-occurring yearly costs (vehicle & home insurance, property taxes, utilities, etc) so the money is there when the bill rolls in. I still have some work to do when it comes to credit card usage, but at least I can see some savings starting to build!

    • Thank you ever so much for your comments. This expands on my thoughts greatly. Would you be prepared to share your story, challenges, obstacles, successes, motivations and have it posted here and attributed to you? Let me know by email at ggorr@ifcg.com

  3. Here is what I have done to reduce my monthly expenses.

    1. Only have 1 credit card and use it only when necessary: hotel reservations etc
    2. Buy a can of coffee and make it at home.
    3. Eat out only 1 per month.
    4. Read all newspapers online free.

    Its a good start and should help over a period of time.

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