I’m currently saving for a downpayment on a cottage in Ontario. Since I met with a financial planner two weeks ago to make a savings plan, I’ve been tempted to cut out every “unnecessary” purchase — all at once. Sure, I’m saving money, but at a cost — I’m starting to hate my life a bit.

How can I make a dent on my savings without falling into a frugality mindset and cutting everything fun out? For advice, I turned to Shannon Lee Simmons, the founder of The New School of Finance — a fee-only financial planning and coaching firm in Toronto and the author of the best-selling books Worry-Free Money: The guilt-free approach to managing your money and your life and Living Debt Free: The no-shame, no-blame guide to getting rid of your debt.

Want to buy your first home?

Sign up for The Ladder newsletter, your essential guide to making the jump into the housing market.

Buying a cottage is the inspiration behind The Ladder — Livabl’s brand new newsletter all about the climb on and up the property ladder. I’ll be sharing more about where I’ve decided to save versus splurge in the next newsletter dropping March 20th (sign up here!). Until then, keep these tips in mind to create a sustainable savings plan that makes you — in Shannon’s words — feel like a human.

Photo: Shannon Lee Simmons 

Continue spending money on things that deliver a high Emotional Return on Investment (EROI).

Study your statements, and take a critical look at where you’re shelling out your cash.

“A lot of times, money is going out the door that isn’t providing any actual value,” explains Shannon. “We live in an age of microtransactions and subscriptions. People might discount those costs — “it’s only ten bucks,” — but if a couple of those things are happening, you can painlessly cut them and raise an extra $50 a month.”

Do you really need a subscription to Netflix, Hulu and HBO? Did you sign up for a fitness app on New Year’s Day and have yet to use it? These things offer a low EROI and should be axed immediately. But what if you’ve been using that workout app every day and you’re now in the best shape of your life? Way to go! The EROI is high, so keep it around.

“Most of the time, when people want to save, they will punish themselves, I won’t do this, I won’t buy clothes for a year, I’ll make my lunch every day, I’ll walk everywhere,” explains Shannon. “All of these things may not be practical or realistic for daily life. So they set you up to inevitably fail.” This creates a vicious cycle where you punish yourself even harder the next time you try to get back on the wagon. Instead, get realistic about your spending and cut where you can — without depriving yourself.

Photo: James Bombales 

Scrap overly complicated budgets and work within a hard spending limit.

Most financial experts will advise you to create a budget and track your spending by breaking your life down into 50 subcategories — coffee, clothes, utilities, phone bill, shopping, etc. What could go wrong? Well, like a strict diet, overly complicated budgets often fail.

“It makes spending money on anything feel scary because if you have $100 for groceries and you end up spending $110, your spreadsheet doesn’t line up, your app goes off, and you instantly feel like you’ve failed,” explains Shannon. “And then you have to borrow from another category and then you might feel like you failed there, too. It doesn’t mean you overspent overall, it just means you overspent in this micro-category.”

Instead, Shannon suggests creating a hard limit with only four simple categories: fixed expenses, meaningful savings (like how much I’d like to put aside for the cottage each month), short-term savings and spending money. Isolate the spending money and that becomes your new budget for the fun stuff.

“Let’s say your hard limit is $800 a month. As long as you’re fed and having fun, who cares if you’re spending your money on a taxi, coffee, restaurants or clothes? You’re not overspending so you don’t have to budget. You just have to know the hard limit and spend within it.”

Photo: ivory.and.oak/Instagram 

Next time you’re comparing yourself to others, remember that every picture has a price tag.

Scrolling through my feed, I notice an interior designer I follow on Instagram proudly holding keys in front of an adorable A-Frame cottage. The envy creeps in.

“The comparison game is impossible to escape forever because it’s human nature. Saying stop comparing yourself is like saying stop breathing. Accept that it’s going to happen. But know that it’s up to you to decide how long you’re going to let that feeling of inadequacy linger and how much you believe it,” explains Shannon.

The first step toward keeping yourself from resenting your own financial situation is to recognize envy when it’s happening. “Calling it out is half the battle,” says Shannon. “Recognize that social media is putting this on steroids. We have so much access to people’s lives now, and we don’t know half the story. You have no idea if those people are swamped in debt, or if they got a massive handout from their family.”

As a financial planner, Shannon has seen this time and time again. Something that might look wonderful on Instagram could tell a very different story when you pull the curtain back. “Every picture comes with price tag,” she explains.

Photo: Marco Verch 

Is renting is the best option for now?

Saving for a downpayment is a long-term game but it can be hard to resist the desire to want it, and want it now. If you’ve put zero dollars aside for fun stuff in order to race to the finish line, consider stretching your timeline in a rental.

“There’s a fear that if we wait three years the market is going to be much higher and you won’t be able to save fast enough to keep up,” explains Shannon. “My advice is that nobody is psychic and we don’t know anything for sure. It’s worse to put yourself in over hot water, even if the market spirals out and blocks you for another few years. The misery and the debt you might take on by putting yourself in a house you can’t afford is awful.”

It can be frustrating to cough up the rent each month for something that doesn’t belong to you. But it may be the most practical option for now. “If you have your rent under control, you can bank a lot of money and take advantage of the fact that you don’t have to run to Home Depot every weekend dealing with unforeseen housing repairs.”

Take that extra cash and squirrel it away for a home when you’re ready.

Want to buy your first home?

Sign up for The Ladder newsletter, your essential guide to making the jump into the housing market.

Developments featured in this article

More Like This

Facebook Chatter