In a Nutshell: If you follow the SmarterSquirrel 12 Month Plan to Improve Your Finances, in Month 4 - Plug the Holes in Your Bucket, you should be on your way to saving more money than you were before. This extra money saved, will help you get closer to reaching your target of saving what you need to on a monthly basis, to reach your financial retirement goals. There are 18 spend categories that you can reduce your spending in to find the additional savings you need, starting with the largest spend category. Or to make it simple, just live on half of your take home pay and save and invest the rest (if you can, it may not be possible for some). If you are carrying consumer debt, you can't buy that discretionary thing you want, put it back.

audi a4 2012 2.0T used car

12 Month Plan to Improve Your Finances: Month 4 - Plug The Holes In Your Bucket

Find ways to decrease the flow of money pouring out of your bucket...
“You can't keep spending what you're spending...”
I'll come right out and say it, you can't keep spending what you're spending and expect to have a good financial future. You can't. It's just not possible (...assuming you're one of the many people out there, overspending and taking on consumer debt).

For many of you, your own lack of control over your spending is why you are in such a bad financial situation. Once you accept that, you will realize that you are actually in control of it. Which means that you can turn your situation around. You can make it better! (For some of you, there may be legitimate reasons why you are unable to afford even the basic necessities, and so though some of the pointers here may help you,... really this article is geared to those who have the means to save more but don't.)

If you're really serious about improving your finances, we need to look at what you've been spending and seriously cut it back if you're overspending.  For those of you who are earning and saving enough every year to save and invest what you found out you needed to in  Month 2, to reach your retirement financial goals, carry on doing what you're doing. For the rest of you, this Month 4 is where you need to do some very hard work!

Ever since I've been working, I've lived below my means. Even when my means was an annual salary of only $12,000. Ever since I finished my MBA I've been living on just half of my take home pay. The other half went to paying down debt from student loans and on a foolishly purchased brand new car before I knew better, and it went into my investment portfolio. As my salary has increased over time, I've allowed my lifestyle to inflate right along with it, enjoying nicer places to live, nicer vacations and better comforts while travelling. But all the while, I've still maintained the rule of living on only half of my after-tax take home pay. The other half of my take home pay goes directly into my investment account. The dividends from my investments, I never touch and I reinvest them into my dividend portfolio. And I don't include the amount of dividends I receive in my calculation of my take home pay. So I only live on half of the take home pay I get from my job. 

Why live on only half of my take home pay? Well, I know there are rules out there of paying yourself first and putting away 10% of your take home pay. But, that assumes you'll have your job for a long enough time that you'll be able to grow your portfolio slowly with that 10% going into savings. It also assumes you're ok with working a job you may not enjoy all that much for most of your life.

I grew up on the East Coast of Canada. It's an area where a lot of people used to wind up on pogey at some point when the economy wasn't doing well. (Pogey is what the government pays you when you wind up unemployed... it's not much and they don't pay it for very long.) And much like the weather there, sometimes the economy is sunny but it can quickly change to foggy or rainy. So while the sun is shining and I'm getting paid, I'd rather save as much as I reasonably can, because you never know when the clouds might roll in and you might lose a job. The folks at the GM plant in Oshawa, or people laid off in the oilsands of Alberta, or any number of fisherpeople out east could tell you all about that. I won't get into what the folks at SNC-Lavalin are going to tell you... that's a whole other kettle of fish.

So I've never really believed the 10% rule, I never thought it was close to enough savings as it seemed to assume lifetime employment. I have always assumed there's no such thing as lifetime employement, and that I'm lucky to have a job and that it could go away at anytime without a moments notice. And so thinking my working years are numbered, I thought I should maximize my saving while I was lucky enough to be getting paid, and so I've saved half of my take home pay. 

I guess I was lucky having a first job where I only earned $12,000. It taught me you don't really need that much to live a good life. So living on half my take home pay years later, when I was making $80,000/year, meant I'd be living on $31,500 after tax. That's about 2.5x what I was living on when I made $12,000 a year. To me that was a pretty comfortable lifestyle. Now that I make even more than that, I have allowed my lifestyle to inflate even more. I'm still living on half of my take home pay, but compared to the $12,000 lifestyle I once lived, living on even half of my take home pay feels absolutely luxurious. For you, living on only half of your take home pay and saving and investing the rest may be too draconian... in that case, let's see how much we can reduce your spending to help you save enough for retirement, maybe it won't be half of your take home pay, but hopefully we can help you save more than you're saving now.

So this month we will look at your spending. How much money is pouring out of the holes in your bucket? Is it too much? 

Last month ( Month 3 ), we looked at the example of someone 25 years away from retiring who is 40 years old and wants to retire with $100,000 passive income every year and has nothing saved yet. We said that person would need to save and invest $2,780 every month to reach their goals. With working side gigs and getting the free money available at work as discussed in Month 3, this theoretical person was able to earn an additional $1,310 a month after tax. Assuming they save all that new found money, that leaves another $1,470 left to save a month. Let's see how we can find that savings. 

So this month, we will look at ways you can plug the holes in your bucket so you can  reduce your spending and save and invest more. Last month we already looked at earning more so you can head back there and revisit if you like. This month we march forward on improving your savings. Let's get that bucket filling up rather than emptying out, shall we?

A basic rule to always apply is this... if you are about to spend money on something discretionary (so not rent/mortgage, not payments on debt that you owe, not speeding tickets, not groceries and utilities... but things you don't actually need to spend money on)... you cannot buy it if you are carrying a balance on your credit cards or if you aren't saving what you need to every month in order to reach your retirement savings goals. 

So at the end of Month 4, you should have a good plan of attack to reduce the amount of money that is flowing out. We will look at various ways you can do that. Some may be short term, others may actually require a longer term solution.

BUT REMEMBER... I have no professional training, skills or accreditation in personal finance, I am not a certified financial advisor or planner at all... so if you need professional personal financial advice, seek advice from a professional. I'm not a professional, I'm just a guy with a blog who figured some stuff out for himself and am just sharing what I know and what I've learned over many years. Some of my friends ask me how to get on the same financial road I'm on, and so I thought I'd tell them and you how to do what I did through this SmarterSquirrel 12 Month Plan to Improve Your Finances, now in Month 4...


If you make enough and are saving and investing enough to hit your retirement financial goals, and you're happy with the lifestyle you are able to live with the money you make and save, and you have no credit card or consumer debt like HELOC or LOC, then great for you. Keep at it. If you're not, then let's look at how you can save more money so you can keep more in your retirement savings and investing bucket.

In Month 1 you did an assessment of all your spending across many categories. Time to pull out that work you did. In short you should take a look at your various spend categories and arrange them from biggest spend to lowest spend. Chances are there are more savings to be had tackling the biggest spend categories than there are tackling the lowest spend categories. In other words, if you downsize the place you live or the car you drive how much will you save vs eating less avocado toast? Don't worry we'll look at the avocado toast spend as well. Myself, I've always allowed my spend on a latte... it gives me a nice walk to a cafe where the people are friendly (I highly recommend Rooster Cafe on Broadview in Toronto) and the coffee is delicious. You get some gentle activity with the walk and some calm looking out at the park as you perk up. (But depending on your situation, you may have to cut back on the lattes as well!)

Something I once said to my sister seemed to stick with her and so I'll repeat it here... every business is trying to take money out of your wallet, don't let them. Let me repeat that... EVERY BUSINESS IS TRYING TO TAKE MONEY OUT OF YOUR WALLET... DON'T LET THEM!

Ok so let's dive in and start plugging up those holes...

HOLE 1: SHELTER (22% of Canadian Household Spend - StatsCan)

How much more did you need to save a month to reach your retirement savings goal? Our example was $1,470 a month left to save. Shelter is typically the largest spend category for most people according to
StatsCan.  So how much do you spend per month on yours? Look at your fully loaded cost for the shelter. Can reducing that spend help you reach your retirement savings goal?


When the folks from the census come around to my brother-in-law's place and they ask if they rent their house or own it, he says the bank owns it. But let's say you own your home... what are you spending on mortgage, mortgage insurance, home owners insurance, maintenance fees and maintenance, and property tax? Is there a way you can spend less than that? I'm not saying to extend to 30 years, you wind up paying more in interest over time that way, I'm saying can you downsize and save money. Do you own too much house? Can you sell and rent for much less per month?

I rent for $2650/month with heat and water included. The place across the street from me just sold for $1.2M, that works out to a cost to own of about $6,243/month when you consider the monthly mortgage assuming 20% down, a 25 year term and 3% interest rate, the 20% down payment not earning the 5% it would be if you were renting and had that money invested, the property tax, the home owners insurance and the heat and water bills. That doesn't even include the maintenance. The house that sold across the street from me is very similar to the place I rent. They have use of the basement, I don't... I have a garage, they don't. I have one bathroom more than they do, my main floor and upstairs is a little bit bigger than theirs. Oh and I pay $3,593/month less than they do to live in the exact same neighbourhood on the exact same street. That's an extra $3,593/month that I can put towards retirement savings that I wouldn't be able to save if I bought the place across the street.

So can you sell and rent for less a month than what your total monthly cost of ownership is, and get going on a great retirement fund? If you sold, would your equity earning 5% pay for your rent, essentially allowing you to save the entire cost of your shelter every month?

Let's say you sell your house and you have $800,000 equity in it. Then you invest that in a dividend portfolio yielding 5%. That means you're getting $40,000 every year in dividends and chances are that amount will increase every year as the underlying companies increase their dividends.  That's $3,333 a month coming in. Can you rent a place for that amount? If so, you're basically living in a place for free. You no longer have to pay your mortgage, property tax, etc... and now your money is paying for your rent. All that money that used to go towards your house can now go toward your retirement savings and investments. You now have essentially free shelter. Your biggest expense is now taken care of! It's worth doing the math to see if you can do that.

Can you sell and move to another house in the same or different city and wind up with a paid off house or a much smaller mortgage? 

If you're looking at a terrible retirement unless you start finding some significant savings, this isn't such a crazy idea.


If you're renting, are you renting too much house? When I only got paid $12,000 for a year, I rented a place that was $250 a month, and I could see through the floor boards but rent was about 25% of my take home pay. When I got paid about $30,000, with a take home pay of about $25,000, I rented a basement apartment for $400/month or about 20% of my take home pay. When I got paid $125,000 USD, I rented a place in Boston that cost $1,400/month USD or about 20% of my take home pay. Now many years later, earning even more, I live in a place that costs about 20% of my take home pay. If your shelter costs 20% of your take home pay, and the rest of your expenses are 30% of take home pay, you can save 50% of your take home pay!

What percent of your take home pay are you paying for shelter? Add up all the costs of your shelter... mortgage, mortgage interest, renters or owners insurance, maintenance fees or costs, property tax, etc... Is it a lot more than 20%? Why?

Look at how much you need to be saving a month to retire well and ask yourself if you're living in too much home. Can you downsize to a cheaper rental place. Let's say you make $100,000, that means you make $76,000 after tax in Ontario, roughly. If you're paying 30% of your after tax income for rent, that's $1,900/month. Can you reduce it to 25% for a savings of $317/month or down to 20% for a saving of $633/month? Let's say you can get it to 25%, that's $317 saved of the $1,470 we had left to save. Now we need to find $1,153 more to save. 


Do you live in a place where housing costs are killing your retirement? Is it worth staying in that city so you can be poor when you're old? Can you find a job in a much cheaper town? Can you use the equity in your home to buy a house in another city so you can move and have no mortgage at all? For example if you have a house in Toronto with $600k equity in it, can you find a nice home in Ottawa for under $600k or in Halifax, or in Montreal, or in Calgary... and make a change. Imagine what you'd be able to save living in a paid for house with no mortgage! Imagine how stress free that would be!  If you rent in an expensive city what would life be like renting in a cheaper city?

I've lived in rural Nova Scotia, Halifax, Ottawa, London (ON), Tokyo, Boston, Toronto, and spent a lot of time in Calgary and Vancouver, and I've visited all over India, all over the US, Europe, Asia and South America... I've discovered you can really live anywhere. It's all great. So why not live somewhere you can afford? Maybe if you do, once your retirement portfolio takes off, you'll be able to live somewhere more expensive down the road.

This category also includes electric, water, heat etc. So stop wearing shorts and tshirts in your house in winter. Throw on a sweatshirt and pyjamas and turn down the thermostat. Check your electric bill for peak hours and make sure you're using the dryer when it's not peak hours. Get some LED lights for your place. (I don't follow that rule, nothing says warmth to me like a good old fashioned incandescent bulb... but that's just me.)

Write down what you saved from Hole 1.

HOLE 2: TAXES (18% of Canadian Household Spend - StatsCan)

Ok you have to pay your taxes. I get it. But... there are legitimate ways to avoid paying part of your taxes (avoiding taxes is fine, evading taxes is illegal). One of the simplest ways to avoid taxes is with an RRSP. Let's say you earn $100,000. According to the basic tax calculator at  TaxTips.cayou would have to pay $24,213 in tax on that income. You are allowed to put up to whichever is the lower amount of 18% of your income or $26,500 in your RRSP in 2019. Assuming you make $100,000 and you put $18,000 in your RRSP, you avoid $6,578.60 in taxes. That works out to $548/month! Just by saving $18,000 you avoid $6,578.60 in taxes!! That's amazing. Why wouldn't you max out your RRSP? Ignore all the noise about taxes in your retirement and how you're going to be taxed on your RRSPs when you withdraw them. Having too much money is a problem you'll be happy to have when you're older. And as you get older you can figure out ways to pull your RRSP money out to minimize your taxes on it. Now if you know you aren't making much money this year and won't be taxed that heavily but next year you'll be getting into the top tax bracket in Ontario of 53.53%, well then maybe hold off on putting money in your RRSP this year and save that room for next year so you can save 53.53% of the money you put in your RRSP from going away as taxes paid. Other than those types of situations, just put it in your RRSP now. 

That $548 in savings means we are now down to needing to save $605 more out of the $1,153 we had left from above. (Actually by saving the $18,000 you've actually saved everything you need... as that's $1500/month so you've taken care of the remaining $1,153 you needed to save). 

Remember when I mentioned about moving to another location where houses are cheaper? Don't forget that taxes vary by location as well. If you are willing to move, can you move to a province, state, territory, or country where the taxes are less? 

Are you married? Does one of you make more money than the other? Does the one who makes more have all the investment gains as well? Why not have the one who makes more do all the spending on things and let the one who makes less take on more of the investing. The lower earner will be taxed less on those same gains. Tax avoided!

Spousal loans can have a similar impact. Lend money to the lower income spouse with an official personal loan with officially charged and collected interest. Make it official so the tax man accepts this. And then whatever the lower income earner makes on the investments is taxed at a lower rate than it would've been if the higher income earner had invested it. Ask your accountant about this. Tax avoided!

If you have a mortgage and an investment portfolio, there is a way to move things around to write off your interest expense from your taxes. Essentially it involves selling your investment assets to pay off your mortgage and then taking out a loan to invest with and buying back everything you had in your portfolio so you can claim the interest on the loan that you are now using for investments as opposed to for your mortgage so you can get a tax deduction. Ask your accountant about that one too, but tax avoided!

Hold investments in the right accounts. If you have dividend stocks that are US based, then hold them in your RRSP, you won't be taxed on the dividends. You can hold non-dividend tax credit dividend stocks that are Canadian in your TFSA. Canadian dividend stocks that give you a tax credit you may as well hold in your cash account. If you're fairly confident about a growth stock you can hold it in your TFSA or RRSP and get the gains tax free. If you've got a riskier growth stock or speculative stock, hold it in your cash account so you can claim any capital losses, you can't claim captial losses if held in your TFSA or RRSP. Tax avoided!

If you buy a house and it's your primary residence, gains are not taxed if the CRA thinks it's believable that you were actually living in it and you weren't just flipping it. So buy a primary residence, live in it and then if your plans change and you have to sell it a few years down the road for a profit, you won't be taxed on it. Tax avoided!

(Remember I have no training in taxes, I'm not an accountant nor a financial advisor, so check with your accountant on all of this...)

Write down your assumed savings on Hole 2.

HOLE 3: TRANSPORTATION (15% of Canadian Household Spend - StatsCan) 

I can't believe transportation is 15% of Canadian household spend! What are you doing? Stop buying so much car! I could have afforded a more expensive car, but I chose to drive a 5 year old Audi A4 that I bought used for $18,800 and I do my own oil changes and plan to drive it until it turns into a rust bucket. My first car was $1,200 when I was making $12,000. Then when I was making $30,000 I bought a car for about $3,000. I bought a new car once... I'll never do that again. Used is really the only sensible way to go. 

Let's say you bought a new car. Well I'd suggest since you bought new, keep making the payments but then once you've paid it off, keep it for as long as you possibly can. I bought a new Jetta once and then I kept it for 16 years. Once you've paid a car off, keep it for as long as you can. There's nothing better than a car you don't have to make payments on..., well there is actually, and that's not having a car at all.

Stop buying a new car every five years. Stop thinking you can afford a car by stretching the payments over 8 years. The only car you can afford to buy is the one you can buy with cash on hand. That's it. Going into debt to buy a car makes no sense. Look at how much cash you have and then look at Autotrader.ca for a car that costs no more than the cash you have to put towards a reasonable safe reliable 4 year old car or older.

If you can do without a car, do it. You'll save a lot. Car registration fees, insurance fees, oil changes, gas, tires, maintenance, parking... it all adds up. It's much cheaper to take public transportation. Again if you're struggling to find a way to save for retirement, eliminating the new car purchase can get rid of a monthly $500 payment, insurance of $100/month, $20/month registration cost, gas of say $200/month, other maintenance costs of say $50/month on average. That's $870/month potentially saved. That's a huge amount. That more than takes care of the remaining $605 we were looking to save for our example.

If you're a two car household and are struggling to save for retirement, maybe you should become a one car household, unless you absolutely need both cars. 

Walk, bike and public transit can be pretty great ways to get around and are much easier on the budget. Don't lease, and don't buy a new car... if you must own a car, keep the one you have for as long as you possibly can (I kept mine for 16 years) and when it comes time to replace your car, buy a 4 year old car or older. Just get it checked by a mechanic you trust to make sure it's ok.

​Total your savings on Hole 3.

HOLE 4: FOOD PURCHASED FROM STORES - 7% of Canadian Household Spend (StatsCan)

What do you spend on groceries? It's the fourth largest spend for most Canadian households. I tended to go to Loblaws for my groceries as the stores are clean and bright and it's a nice shopping experience. Then I discovered Food Basics, the stores are not as nice as Loblaws but the prices are certainly a lot better. As an example, if I buy a 1.54l jug of Simply Orange orange juice, a head of broccoli, a jar of Kraft peanut butter, a frozen Delissio pizza, a bottle of Heinz Kethcup, some Purex laundry detergent, a 2l tub of yogurt and a tube of Crest toothpaste, at Loblaws this week that will cost me $38.92, at Food Basics for the exact same brands and sizes it'll cost me $19.80. A savings of 49.1%!!! Almost half! Let's say you spend $300 on groceries a month, imagine saving 49% that's almost $150! Let's say you spend $500 a month, imagine saving 49% on that, that's almost $250/month saved! Whatever, check your flyers, go to the low end grocery store, you could be saving a lot on your groceries for exactly the same product! Maybe you could be saving up to half of your grocery bill. Don't worry about going somewhere nice when you're shopping for groceries... you're shopping for groceries! Who cares if its nice. Is it so nice that it's worth paying almost double for the same stuff???

So maybe you can save $150 to $250 a month just by doing some comparison shopping. Get out those flyers!

What do you save on Hole 4? Write it down.


Well the pension contributions there's really no getting around. If you get the chance to take a lump sum amount of your pension at some point then go for it, better it be kept in your hands than the hands of an employer who might go bankrupt and your pension disappers, talk to some people who used to work for Sears or Nortel if you want to hear about the pains of corporate pension plans.

As for the personal insurance. It's good to have term insurance if you need to make sure people who depend on you are protected in case you go before you have a stock pile of money to see them through. So shop around for a good rate. Having long term disability insurance is a good thing as well. But shop around for the best rate as well as doing some digging to make sure your insurance company is legitimate and hassle free when it comes to actually paying out the amount needed. 

If you did find cheaper insurance, how much did you save on Hole 5? Write it down.

HOLE 6: HOUSEHOLD OPERATIONS - 5.7% of Canadian Household Spend (StatsCan)

The big spend category here is in communications spend. So think about your TV, Internet, home phone, mobile phone, Sirius, Netflix, Hulu, Amazon Prime, Crave, Apple iTunes, Nest, and other spend. 

As I write this article, Rogers is offering a $95/month bundle for Internet with 75Mbps and unlimited usage and starter TV with 35+ channels for new customers. Bell is offering $93/month for 50Mbps unlimited Internet and the basic TV channels. Comwave is offering a bundle with TV with 90 channels, unlimited Internet at 30Mbps and a home phone for $90/month. What are you currently paying? I call the retention desk every 6 months or so of my provider, and if they can't save me money and I can save by switching to a new provider's offer then I switch to which ever provider saves me more. I'm now on a very basic TV package that I upgrade when tennis grand slams happen and then I cut it back to the basic TV package after tennis is over, and I get Netflix and Amazon Prime. With all that and the occassional Apple iTunes movie rental, there's no real need to pay for a more robust TV service. If you're not into anything that requires cable TV (like Tennis grandslam coverage) you can even just get an antenna for HD TV signal and then that part is free. Everything else you can get from internet based video services like Netflix, Amazon Prime, Hulu, YouTube, Apple iTunes, Roku etc... 

I was paying $155 a month to Rogers for Internet, TV and home phone, and I moved to Bell and cut the home phone and am down to around $100 a month after tax. So another $50 of savings per month to be had. How much can you save?

Who is your mobile phone provider (by the way you don't need a $1000 phone... find a free one from your provider, or buy a used one)? What are you paying them for your monthly service? With Koodo and Fido right now you can get a 4GB unlimited calling texting plan for $55 if you bring your own phone. Rogers and Bell's cheapest offer I see is $90/month for 6GB unlimited calling texting if you bring your own phone. (Koodo and Fido are $65/month for 6GB unlimited calling texting). Is any of that cheaper than what you are paying right now? Why don't you switch? Save some money. 

Oh and stop upgrading to the latest and greatest phone. I still have an old iPhone SE... it works fine. Constantly buying new phones is a great way to never save money. For more on that read this post...

What did you save on Hole 6? Write it down.

HOLE 7: RECREATION - 4.7% of Canadian Household Spend (StatsCan)

Recreation includes equipment, vehicles and services. So think about travel, ATVs, boats, kayaks, skis, snowboards, tennis racquets, nights out at the movies, at the theatre, at the ballet, at the hockey game, at the basketball game, going bowling, playing polo, hot air ballooning, whatever you do for recreation, that spend is here. 

Now I'm of the belief that life is meant to be lived. What's the point in being alive if all you do is sit on a couch being a couch potato? That's not living. Get out there and play I say, and if it costs a little bit to do the things you love and to have awesome experiences, whether that's snorkeling with manta rays, or taking lessons to get better at playing guitar or to improve your tennis game, or to get fitter at the gym, or to become a better rock climber, or to improve your dancing skills, or learn to paint, or go sailing more often, or to have a weekend of snowboarding, well do it... spend some money. Enjoy life! Go on that trip!

I'd rather live in a smaller more modest home, drive an older car and enjoy all the recreational activities that I love than be in a larger less affordable home, driving a newer more expensive car and having less money to do the things I love. 

So let's not scrimp and save in this category. Experiences are what makes life so enjoyable. BUT.... (did you just hear the screeching brakes in your head?)... don't do any of this on a credit card. If you have the cash sitting in your savings account and you can pay the credit card off as soon as your done paying for it, then you can use your credit card to pay for this stuff. Don't take on debt for your recreation. That's the only limit I'd suggest. Oh and, the other limit is, you can only spend freely on recreation after you've ensured you're saving enough from all other categories to reach your monthly retirement savings goals. As long as your doing that and not going into debt, then spend freely on recreation! 

If you aren't saving enough for retirement then yes you're going to have to curtail your recreation spend. But seriously, focus on the other areas first to try to find the money you need to save. Cutting back on recreation should be what you look to after you've exhausted all other areas of possible savings in my opinion.

If you unforunately have to curtail your spend here, how much are you able to save on Hole 7? Write it down.

HOLE 8: CLOTHING AND ACCESSORIES - 4% of Canadian Household Spend (StatsCan)

Ok this one can get a bit crazy. Do you really need a $5,000 purse? Do you really need a $1,200 smartphone? Do you really need a $5,000 watch? What a collosal waste of money. Not only that, but assuming your portfolio gains 9% a year, every $1 you spend when you are 40 is $8.62 you won't have when you are 65. So that $1,200 smartphone you buy when you're 40, you're robbing 65 year old you of $10,344. How long will you have to work when you're 65 to replace that $10,344? Is that smartphone really worth $10,344 lost from your retirement fund? If you buy something for $1 every year between 40 and 65, you've lost $93.32 from what could have been in your retirement account if you had saved and invested that dollar every year instead. So if you're 40 and you buy $200 worth of clothes every boxing day that you don't really need, that's $18,664 that goes missing from your retirement fund when you're 65. 

We all need clothes, and it's good to have a purse or wallet to carry things in, and it may even be nice to be able to know what time it is, but think much more practically about these things. Every business is trying to take money out of your wallet. Don't let them. Buy only what you need and forget about brands, think about the function of the item. I'm quite sure a $100 watch tells time just as well as a $5000 watch. A $20 wallet is every bit as functional as a $500 wallet. Just think and buy only what you need, stop wasting your money. You're not just wasting the price you're paying today, you're wasting all the compounded growth that would have gone along with it. (Again, if you're saving enough to hit your retirement savings goals, then spend as you like, buy that expensive thing if you want it, but if you aren't hitting your retirement savings goals, well then you can't afford to buy that thing!)

Ok, some required reading here is my post on The Things You Own... End Up Owning You!

Now that you've done the required reading and are inspired to save on Hole 8, how much will you be able to save? Write it down.

HOLE 9: FOOD PURCHASED FROM RESTAURANTS - 3% of Canadian Household Spend (StatsCan)

If you aren't saving your target for reaching retirement, start cooking at home. Going out to eat, ordering take out, getting it delivered by UberEats, Foodora, SkipTheDishes etc is a huge waste of money. If you are saving what you need to, to reach your retirement goals and if you have enough cash to pay for eating out without going into debt, and you aren't carrying consumer debt on credit cards or in a line of credit, then go for it. Enjoy eating at restaurants, it's an excellent thing to do. I love all the various food options available in Toronto.

But when I couldn't afford it, I cooked at home all the time.  I hosted pot luck dinners at my place, invited friends over and we would have great meals at home for a lot cheaper than going out to eat. And eating home cooked food will most likely be much healthier for you as well. 

I said I'd get to avocado toast. So one avocado even at Loblaws is $1.79. A nice loaf of grainy nutty rye bread is $4.59. So two of you can have some avocado toast at home with plenty of bread left over for $6.38. One order of avocado toast at Early Bird in Toronto is $10.50 before tax and tip so that would be about $13.50 by the time all is said and done. So for two of you that's $27 assuming you both get avocado toast. And you'll probably get some coffee with it, so let's say another $4 each for $8 total plus tax and tip another $10. So all in breakfast cost you $37 to eat outside of your home versus less than $6.38 at home. You saved $30 by eating one meal at home. Imagine how much you can save all month!

So what are you spending on eating out per month? Look back at the work you did in Month 1 to see. Can you cut that spending in half? How much will you save?

Write down your savings on Hole 9.


According to my StatsCan data, we have 9 more spend categories, or holes to plug. So I guess we are done with the front nine. Take a break at the club house. Grab a coffee (that you make at home for pennies). Then come back and we'll go through the back nine. I didn't realize when I started out that there would be 18 holes...

Ok, are you back? Let's get to the next hole...

HOLE 10: HOUSEHOLD FURNISHINGS AND EQUIPMENT - 2.7% of Canadian Household Spend (StatsCan)

I know Wayfair, Leon's, Ikea and others are calling out to you constantly to upgrade your furniture. It's fine to do. Make your home a warm and comfortable place. Just don't go into debt doing it. Don't fall for any of the don't pay a cent until next year deals. Don't buy on credit. Only buy furniture with cash on hand. If you don't have the cash, you can't afford to buy the furniture. If you can't find the cash to pay for it now, how will you be able to pay for it when you're being charged 19% interest for the same thing? So if you're saving what you need to to retire every month, and you don't have consumer debt, and you have the cash, then you can afford to buy that next piece of furniture.

When I was starting out, I bought second hand furniture that was absolutely fine. I slept on an airmattress until I had the cash saved to buy a nice bed. Sleeping on an airmattress definitely gave me the incentive to save quickly to be able to buy the bed. 

Once you've reached the point where you're saving what you need to in order to reach your retirement goals and you have the cash to spend, go for it, upgrade your home and buy some nicer furniture. Until then, keep using the old furniture you have. 

By avoiding buying more furniture, what's your monthly saving on Hole 10? Write it down.


Most people grossly underestimate how much they spend on gifts. How much do you think you spend on gifts? ...You're wrong. Go to my blog post 'Tis the Season to Spend on Gifts, and complete the exercise there then come back here... 

Now let me ask again... how much do you spend on gifts? Right... much more than you thought! Ok well cut that in half. How much do you save? Great you probably just found the remaining money you needed to find to meet your retirement goals.

Support payments, well that's a court order, not much you can do there. 

Charity donations. I believe charity starts at home. If you're carrying credit card debt and you're donating to charities, what are you doing? You can't afford to give to charities. Go volunteer if you like, but you don't have the cash to give. I'm sorry but you don't. Once you reach some financial success and you're out of debt and saving what you need to every month to meet your retirement goals and you've got some cash laying around, then you can start to donate to charities if you like. Until then, you can't afford it. Now don't get me wrong, I give to charities, I donated my old VW Jetta to Canadian Guide Dogs for the Blind, I lend out microfinance funds through Kiva.org, etc. It's a wonderful thing to do. But you're not helping anybody if you're donating to charities while you go further and further into debt. Get out of debt, get retirement savings on track and then you can give.

How much did you save on Hole 11? Write it down.

HOLE 12: DIRECT HEALTH CARE COSTS TO HOUSEHOLD - 2.1% of Canadian Household Spend (StatsCan)

​Well what can you say on this one. In Canada we're pretty lucky to have health care costs largely covered, but there's still dental, optical and pharmacy costs to worry about. If you've got a partner, make sure you're covered by the better of your insurance plans through work. Then make sure you use the services you get covered through your insurance to make sure you're doing the preventative stuff on dental and optical to avoid bigger problems down the road.

In the US, according to a study published in the American Journal of Medicine , more than 42% of the estimated 9.5 million Americans diagnosed with cancer between 2000 and 2012 drained their life savings within two years of diagnosis, within 4 years 38% were financially insolvent... bankrupt! So get yourself some good health insurance and some good disability insurance so that if you do get sick and can't work, your health care will be paid for by insurance and your salary or part of it will keep coming in through disability insurance. Find an insurer with the broadest definition of disability so that if you get cancer, that's included.

Given this fact, another blog post bears repeating at this point, and that's to get yourself as healthy as possible. Required reading now, go to my post on  Your money will last a long time, how about you

One way to save on health care costs is to just be as healthy as you possibly can be, of course though, that's no guarantee...

Ok not much to be saved here, unless you weren't taking advantage of your work place insurance and benefits. In which case, now that you are, write down what you think you'll save on Hole 12.

HOLE 13: EDUCATION - 2.1% of Canadian Household Spend (StatsCan)

Ok well in Month 3 I suggested you invest in yourself. I'm a big believer in education. What I'm not a big believer in is needing to pay extra for the ivy league school or for private school for kids. (And no I'm not talking about the bribes to get your kids into an ivy league school... hopefully you're not doing that!)

According to a study by Stacy Dale and Alan Krueger, if you have the aptitude to apply to an ivy league school and good SATs, then whether you actually go to an ivy league school or a regular cheaper school, you're earnings later in life don't really differ. So if that's the case, why blow a bunch of money on the ivy league brand if you're going to wind up making the same amount of money. Save the money and go to a cheaper school and be further ahead for having less student loan debt. The exception they found in this study conducted in the US was that going to an ivy league school did give an earnings jump vs a regular state school for black, latino, low income, and students from parents who did not go to university. For others, save your money and avoid the ivy league schools, there's no earnings advantage.  https://economix.blogs.nytimes.com/2011/02/21/revisiting-the-value-of-elite-colleges/

Now on to private school for kids. Who is sending their kids to private school from junior kindergatern to grade 12? It's nuts! It's $32,000 a year! That's more than any year of tuition I paid for my undergraduate degree in psychology, that's more than any year of tuition for my law degree, and that's more than any year of tuition for my MBA. In fact I got my entire MBA tuition for less than $32,000. My entire three years of undergraduate degree tuition plus my entire three years of law school tuition plus my first and second car all added together is less than $32,000! One year of junior kindergarden costs $32,000??? To learn how to use playdoh? To learn what a triangle is? You cannot be serious!!! (Said the way an upset John McEnroe would say it!) 

You realize you already paid for your kids schooling in April right? That's when you filed your taxes and saw how much money you gave to the government. Well everybody gave money to the government and the Ontario government as an example already spent 18.3% of its budget on education, that's $29.1B in tax dollars to educate your kids. Stop wasting your money on private school, you already paid for public school! That makes as much sense as buying yourself two plane tickets on two different airlines to the exact same destination on the exact same day and at the exact same time.

Look at it this way. If you spent $32,000 on your child's private school, every year from JK to grade 12 (from when they're 5 to 17), you would have spent $416,000 on something they could have had for free. I went to public school in a rural part of Nova Scotia and I became a lawyer and I went to one of the best MBA schools in the country. And now I'm financially independent. You really don't need to send them to private school. It's a huge waste of money. Public school is fine. Just emphasize education to them and read to them when they're young and treat them like intelligent beings. That's all they need. Free public school and to be treated lovingly and like intelligent humans. And you'll save $416,000! 

Now think of it this way, if instead of sending the little munchkins to private school, if you instead sent them to a perfectly fine public school and saved and invested that $32,000 every year in a dividend growth portfolio earning 9% on average every year, you would have $734,508 per child by the time they finish high school! 

Now let's assume you take that money and put it in a trust right when they graduate high school and never add another penny to it, letting it grow in that same portfolio that they can't touch until they hit the ripe wise old age of 40. It would be worth $5,330,969!! That's $5.3M!! If you waited until 45 it would be worth $8.2M! Wait til 50 and it's worth $12.6M. That's a generationally life changing amount of money! And you want to waste it on fancy playdoh??

In fact, let your kid fend for themself and you can have that $5.3M for yourself when your kid is 40! That'll come in handy when you're in your late 60s! 

Why on Earth would anyone waste so much money on private school. Has the world gone mad? It's a madhouse!!! A MADHOUSE!!!!

Ok I think it finally happened... I'm having a meltdown... I've blown a gasket. Time for me to take a break before coming back to the next hole to plug.

But hey we just plugged Hole 13 and saved $416,000 or $12.6M depending on how you look at it! (If your kid is in private school, yank them out of there ASAP!) How much did you save on Hole 13? Write it down.

George Taylor thinks it's crazy to pay $32,000/year for private school...
HOLE 14: TOBACCO PRODUCTS, ALCOHOLIC BEVERAGES AND POT - 1.8% of Canadian Household Spend (StatsCan)

Well you gotta stop smoking cigarettes. That stuff will kill you. And you saw what happens to your finances in the US if you get cancer. See your doctor about treatments to help you stop smoking. Ok, so now that you stopped smoking cigarettes, how much are you saving? 

Everything else in moderation including moderation. But the cigarettes definitely need to stop. 

And if you have an alcohol or pot addiction, well then there are places you can get help with that too, to help you stop.

Now cut back on it and figure out what you save in Hole 14. Write it down.

HOLE 15: PERSONAL CARE - 1.5% of Canadian Household Spend (StatsCan)

I take personal care to mean hair cuts, I see a whole bunch of nail salons in my neighbourhood so I guess that's a big expense for people, hair removal, massages, etc. Well I don't know what to tell you. If you've got plenty for your retirement portfolio from other savings and you enjoy the personal care stuff and it makes you feel better, well go for it I guess. As long as you aren't carrying consumer debt. 

But if you aren't saving enough even after the 14 other holes, well then cut back on this too. Do your own nailpolish. Try to use your work benefits for the massages. Maybe you'll look better with longer hair? Maybe wait a little longer before going in for a hair colouring or hair cut? 

How much can you save on Hole 15? Write it down.

HOLE 16: GAMES OF CHANCE - 0.2% of Canadian Household Spend (StatsCan)

Chances are you're going to lose at games of chance. Well fortunately this cateogry is less than 1%, so really you're probably not doing too much damage in this category. But in case you are wasting a lot of your money on lottery tickets, betting on horse races and the casino... just remember, the casino always wins. You're just going to lose money. So don't even bother. Take that money and invest it in safe reliable dividend growth stocks. Ok so how much money did we just save with Hole 16? Write it down.

HOLE 17: READING MATERIALS AND OTHER PRINTED MATTER - 0.2% of Canadian Household Spend (StatsCan)

I'm all for enlightenment and learning. But most content is available free. So try to find it free if you can. Subscribing to newspapers, journals and things that expand your mind are worthwhile. Libraries are great places to get free reading materials. Sitting with a book on a cold rainy day is a great thing. Share books with friends. Read the books you already have on your shelves before you start buying more books. 

Don't waste your time and money reading gossip magazines, those celebrities aren't reading about you, why are you reading about them? Read things that expand your mind and things that teach you things. If you want to be entertained by what you read, drop the gossip rag and pick up an award winning fiction novel.

Ok, did I save you anything by having you stop buying People Magazine? Write down your savings on Hole 17.

HOLE 18: MISCELLANEOUS EXPENDITURES - 2.1% of Canadian Household Spend (StatsCan)

Well here we are the last category. The final hole to plug before you head back to the club house. Ok I'm mixing metaphors of leaky buckets and rounds of golf. Look at your own personal spend numbers that you tallied back in Month 1, look at any other categories of spend that you have that I haven't touched on. How can you cut them back? How much can you save? Write down your savings on Hole 18. 


There are many different areas that you spend money on, and all are potential areas to save by cutting back your spend. The basic rule is to stop spending on discretionary things if you are carrying consumer debt on credit cards or lines of credit, or if you aren't saving what you calculated you need to save every month in order to save enough to hit your retirement savings goal. 

I seemed to naturally just limit my spending to half of my take home pay for most of my life. So I've never really focused too much on the 18 holes. I basically restricted myself to living off of one paycheque a month. The other paycheque went to paying off debt or into my retirement savings. So to make it really easy, pretend you only have half of your take home pay and live on that if you can. If you're a couple, live on half of your combined take home pay if you can. If not, hopefully you found savings going through the 18 spending categories. Totalling it all up, how much savings were you able to find? 

I'm putting up a spreadsheet that allows you to see what your current spend on these 18 categories is and to capture how much you can save on each bucket hole. You can total it up and see what your total monthly savings would be.

If you aren't making enough to live on half of your take home pay...  maybe you can revisit Month 3 and see what you can do to increase your income. 

Our example of a person wanting to retire with $100,000 passive income when they are 65, who is starting with no savings at the age of 40, meant they needed to save $2790 every month. From Month 3 we were able to get that theoretical person an additional take home pay of $1,310/month, leaving an additional $1,470/month to find in extra savings. The Hole 1 example got us $317/month saved, leaving $1,153/month to save. Hole 2 got us $548/month in tax savings, leaving $605/month to save. Getting rid of a car in Hole 3 saved $870/month, meaning with those three holes we hit the savings target and then some. As I said, focusing on the largest spend categories should help you find the largest savings. If those three holes alone don't get you there, or if you can't save on those three holes, keep going with the other 15... you'll be surprised but you should be able to find the savings you need. 

You'll notice I didn't really talk about savings from reducing your debt or reducing the interest on your debt. Well that's because it's such a big topic that it deserves its own month. That's the topic for Month 5. This was the Month 4 portion of the SmarterSquirrel 12 Month Plan to Improve Your Finances: Month 4 - Plug the Holes in Your Bucket. Stay tuned for Month 5 - Let's Talk About Debt Baby..., coming out the first week of May 2019.

For Month 1 - Where Are You Now? Click here.

For Month 2- How Much Do You Need To Retire? Click here

For Month 3 - Pour More Into Your Bucket... Click here

Be a SmarterSquirrel... Save. Invest. Enjoy.

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SmarterSquirrel 12 Month Plan to Improve Your Finances:
Month 4 - Plug the Holes In Your Bucket
Lessons Learned:
  • If you are carrying consumer debt on credit cards or in a line of credit, you can't spend money on that discretionary thing
  • If you aren't saving what you need to this month to hit your monthly retirement savings goal, you can't spend money on that discretionary thing
  • There are 18 spend categories that you can reduce your spending in
  • Start from the largest to the smallest spend categories and see where you can find the most savings to hit your monthly retirement savings target
  • Once you identify the savings areas, go ahead and start cutting the spending
  • If you can live on half of your take home pay, and save and invest the other half of your take home pay... do it!... that's the easiest way to save for retirement based on my experience

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