How to put your savings plan into action

A middle-aged man looks up information on his laptop computer.

A review of your goals, budget and spending habits can help you get your savings plans on track.

Today’s economic conditions are driving a “shift to thrift,” as Canadian consumers rethink their spending and saving habits. Even if you’re not feeling a squeeze, you’re likely looking for ways to stretch your savings and secure your financial footing as the markets recover.

Here’s how to activate your own shift in financial priorities and get your savings plans on track.

Re-evaluate your budget

In the five years before the economic downturn, Canadians went on quite a shopping spree for new cars, home furnishings, the latest fashions and luxury items. During this time, many households overspent relative to income and saved too little.

Today, the consumer binge appears to have ended and households have curbed spending considerably. According to TD Economics, the personal savings rate rose to a six-year high of 4.7% at the end of 2008 — and the savings rate is expected to climb to 6%–7% and stay there over the next five years.¹

How do you boost your own savings rate? Start with the basics of developing or reviewing your household budget to identify needs versus wants. Take a hard look at monthly services like gym memberships, cell and home phone plans and discretionary purchases that could be draining you of potential savings.

Take action: Count your cash flow. Use our online Cash Flow Calculator to help pin down where your money comes from, where it goes and how much is available for saving and investing.

Set your savings goals

When it comes to financing your life goals, start with the end in mind. Whether your plans include a family trip, sending a child to university or building a “rainy day fund,” estimate how much you need and do the math to develop a savings plan for each goal.

Setting targets is the best way to maintain a systematic approach to saving, as it allows you to decide on a dollar amount to put aside each week or month. Paying yourself first through the TD Waterhouse Pre-Authorized Purchase Plan is the easiest and most convenient way to make your savings goals a priority.

Take action: Create your goal timelines. Work out how much you need to set aside per month for non-retirement savings by using the handy Your Savings Tool.

Crunch your own credit

Rethink your use of credit and how much you can afford to borrow. Since 2003, household credit has grown at an astonishing average annual pace of 9%, nearly twice as fast as the 5.3% increase in personal disposable income, according to TD Economics.

Today’s low interest rates are a great opportunity to accelerate paying down the principal on any outstanding loans. Use what you save in lower interest payments to tackle higher-rate debt such as credit cards, or chip away at your mortgage.

It might not feel exactly like “savings,” but repaying your debts faster can shave off thousands of dollars of interest costs over the long term. You’ll be able to apply this future windfall to other goals, such as a more comfortable retirement lifestyle.

Take action: Get a grip on debt. Find online tips and strategies to service your debt and calculate how much you can afford to carry by visiting www.tdcanadatrust.com/planning/debt_planning.jsp

Do a retirement reality check

Get a handle on how much you really need to save to reach your retirement goals. You may be surprised to find that by simply boosting the frequency of your Retirement Savings Plan (RSP) contributions and making them automatic with a Pre-Authorized Purchase Plan, you’ll be able to reach your goals sooner.

Take action: Explore your vision. Visit www.tdretirement.com for a self-guided tour of your future possibilities. Or work through our easy and interactive Your Retirement Strategy worksheet to try a few retirement savings scenarios and calculate contributions.

Max the benefits of registered savings

Every dollar you invest in a registered savings plan like an RSP or a Tax-Free Savings Account (TFSA) is an opportunity to defer or reduce taxes today and increase your stake in the future.

It makes sense to guide your savings into your RSP (for long-term savings) and TFSA (for short-term goals like your “emergency fund”) and contribute any bonuses or financial windfalls where they can grow in a tax-advantaged environment.

As you decide your savings targets and where to direct your contributions, your investment portfolio can be structured to foster tax-effective growth.

Consider strategies to allocate certain assets to your RSP and TFSA to maximize tax efficiency in your portfolio. For instance, you might consider holding investments that earn interest income inside these plans and hold equity investments that have preferential tax treatment in non-registered accounts.

Take action: Consult with an expert. Your local TD Waterhouse Investment Centre provides a wealth of educational resources. One of our Investment Representatives can help you review your overall portfolio to make it more tax-efficient.

To find an Investment Representative in your area, go to www.tdwaterhouse.ca/services/asdr.jsp