10 ways to save more and pay down your debt

And who doesn’t want to find a way to save more? Countless studies show Canadians are not saving enough towards retirement, and many current retirees report wishing they had socked away more along the way.

Whether you’re juggling credit card balances or trying to boost your savings, here are some strategies to help you get there faster.

1. Set a goal

If you’re serious about saving, you need to set a goal so you know what you’re saving for. Whether it’s a trip to Japan you hope to take in a few months or saving up for retirement, having a very specific goal will help you stay motivated and on track.

2. Track your dollars

The best way to get on track to saving is to spend less than you earn. Tracking your spending—either through a daily journal or an app—can help you do this. Some banks offer spending apps through your online banking, but third-party apps like Mint and You Need a Budget (YNAB) are also popular.

3. Trim spending

Consider trimming expenses. Once you know how much you’re spending monthly, you can decide what areas you can reduce or where you’d like to cut back on so you can meet your savings goal.

4. Kill two birds with one stone

For those with low to moderate incomes, paying off debt—including a mortgage—is the best tax planning you can do. That’s because you don’t pay taxes on the capital gains on your principal residence and there’s no tax on the return you get for getting out of debt.

5. Automate it!

Set up an automatic transfer of funds to a savings account, tax-free savings account (TFSA) or registered retirement savings plan (RRSP) so that a set amount—say, 10% of your gross monthly income that comes off your paycheque automatically. This way, it’s not a question of finding the willpower to save every month. So save first for the goals that you have and then spend what’s left over.

Watch: How can I start saving money?

6. Pay less tax

Slash your taxes by making sure you use TFSAs and RRSPs properly. Hint: Generally speaking, if you make less than $50,000 annually, TFSAs work best. If you make more than $50,000, then saving in an RRSP works best.

7. Don’t tempt yourself

To control spending, it helps to eliminate temptation. Forget roaming through malls and bookstores, where impulse buys are common. Instead, hit the gym or join a book club to stay busy and engaged.

8. Stack it

One strategy to pay off debt quickly is the stacking method. List all of your debts in descending order from highest interest rate first on down. This strategy requires you to make minimum payments on all of your debts while directing the remainder of your funds towards the loan with the highest interest rate. Once that one is paid off, do the same for the next debt on your list.

9. Let it snowball

A second method to pay down debt is the debt snowball strategy. This is where you focus on paying your debts from the smallest amount to the largest by making minimum payments on all your debts and putting the remainder towards the one with the lowest amount—say, a credit card. Paying off a small debt can lead to a feeling of accomplishment, which is an important motivational factor for those who may feel overwhelmed by their debts.

10. Know your contribution limits

The TFSA limit for 2023 is $6,500. Try to max it out if you can. And remember, your room is cumulative, meaning the unused amount you can add to your TFSA has rolled over. RRSP room is a bit different because it’s a percentage of your earned income, and it gets reduced by a pension adjustment if you’re in a pension. Like your TFSA room, it too carries forward and is based on all your cumulative RRSP room and past contributions.

Compare the best savings accounts in Canada

More on financial advice:

• What the Bank of Canada’s latest overnight rate hike means for your finances
• How to prepare your finances for coming to Canada
• “Why do I need a financial plan?”
• Planning for retirement with little to no savings to draw on

About MoneySense Editors

MoneySense editors and journalists work closely with leading personal finance experts in Canada. Since 1999, our award-winning magazine has helped Canadians navigate money matters.

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