aHow to Hoard Money (not toilet paper)
I’m hoarding money for the next round!
I came across a cartoon showing a couple standing in front of a stockpile of toilet paper with one saying to the other – “we forgot to hoard money!” I found it to be a particularly profound statement on our current state.
My immediate thought was about the difficulties faced by everyone – loss of jobs, loss of business, loss of support, with many facing, or will soon be facing, financial hardship. I do believe we all are facing this challenge – the ripple effect is so widespread that it is impossible not to be impacted by the changes of any business, no matter how small. There are hardships for some, opportunities for others – some immediate, some in the days ahead. Most of us will face both.
In many cases, it will be the money (not the toilet paper) in our hoard that will determine how we emerge from this crisis.
We are shopping for essentials; luxuries are not foremost our minds. Many are no doubt asking themselves why they hadn’t been hoarding money.
Let’s face it, from the time we received our first gift of money from Great Aunt Mary and our first allowance we have been receiving tips on how to manage our money; strategies for saving for a rainy day and saving up for special vacations, luxury items and retirement. Yet most of us are living from paycheque to paycheque, counting on credit cards to get us out of unexpected financial emergencies and with savings more appropriate for a piggy bank than a term deposit. We have more consumer debt than any generation before us.
We will see a lot of people looking at their financial resources and re-evaluating their need to hoard money.
This pandemic was not a slow-moving event providing time to prepare. It went global in weeks, and our communities were impacted within days. Many went from having an income to having none within hours as businesses were forced to shut their doors and lay off staff. This scenario can and will happen again. Any crisis that affects our communities will affect us all. We will see the need for more effort to prepare for such eventualities. And I don’t mean making sure you have enough toilet paper!
Money Hoarding 101
Yes, it is time to go back to basics, to all those small, no, make that teeny tiny steps that adults tried to teach us as children. These were steps that were intended to become habits needed to save for our financial futures.
Because we are living more and more in a cashless environment with debit and credit cards being the norm (some stores are not accepting cash right now) I turned to my online bank (Tangerine) who offers a number of unique ‘automatic’ savings plans. After all, I want to make this as painless as possible and maybe have some fun as well. Other banks and financial institutions may offer similar programs, and I’m sure your bank will be happy to answer your inquiries.
Automatic Savings Plan
This has been around for a long time and is as basic as you can get. Every financial institution has this available. It is pretty standard practice probably from when money first changed hands. Simply put, designate a dollar amount that will be transferred from your income to a savings account on a regular basis. This does call for budgeting a savings amount and sticking to it. It should be a non-negotiable part of your financial plan. You should have enough savings to see you through at least 3 months of living expenses. Of course, more is better.
Pay yourself first
Now this one is also among the first basic things we’re told with regard to budgeting and money management. But when times are tough, or there is a shoe sale, it is hard not to rationalize spending that money and maybe convincing yourself that you will make it up later. When these types of actions are left to us to do manually we can often fall short.
For myself, my bank has a plan where I do pay myself first. I can specify a percentage to go into my hoarding account from each deposit made. I have the ability with Tangerine to identify the type of deposits received into my account – salary, refunds, government benefits, miscellaneous income – and then to identify what percentage from which deposit type should go to my hoarding account. So maybe 50% of your tax refund goes into savings, while your employment income sees 10% moved into hoarding and miscellaneous income contributes 20%.
The idea is to make it effortless and painless.
A penny saved is a penny earned.
Remember that maxim? It is time to learn to save pennies again. Yeah, I know – we Canadians don’t have pennies, but we can still save them – virtually!
My bank has a program that will automatically round up charges made to my chequing and savings accounts, and bank debit card and deposit the difference into a savings account.
Think of it as loose change in your pocket. Remember that old tip about emptying your pockets of all your loose change every night and dumping it in a jar. Same idea!
The bank’s plan gives me the option to round up my charges to the nearest $1, $2, or $5 amount with the difference being deposited in a savings account. Rounding up to $1 may not be inspiring to you, maybe rounding up to the next $5 provides more of an inspiration.
You won’t miss these small amounts (just like the loose change in your pocket), but you will end up with a fair chunk of money stashed away.
I use my debit card instead of cash for most purchases so most months I have quite a few charges – every time I buy coffee, groceries or anything else, those round-up pennies get deposited to my hoarding account. It doesn’t seem like much, but after a month or so of doing this I’m was surprised by the accumulated amount – and I did not miss these pennies.
Even in the last month, while in isolation just paying my bills and buying groceries every two weeks, my savings account received over $10. If it had been a ‘regular’ month (pre-covid) my various expenditures for shopping therapy and entertainment as well as necessities would have ended up with a much higher amount. How much you save will depend on the number of transactions. I have even changed my regular payments on various accounts. Where I used to round up to an even amount, I now round up to a 50 cent amount so that I will end up with another 50 cents in my hoard! Okay – I can get a little obsessive. It is fun to watch these little bits grow.
Your own Tax on your hobbies and luxuries
The idea here is that you add a surcharge on spending on your hobbies or addictive luxuries (like that latte that you have to have every afternoon from your local coffee shop). You will need to be able to identify your spending categories so check to see if your financial institution supports this. You can then instruct your bank to deposit an additional percentage (1, 2, 5 or 8%) to your hoard account. These are pretty small accounts – but we often don’t realize just how much we are spending on some of these categories so it could add up which can then add some justification for spending on your little luxuries.
Betting on your sports team
This is one that I will not be utilizing – I’m not a big sports fan. You are able to bet on your favourite sports team – win or lose. You can select teams in the NHL, CFL, NFL, MLB, and NBA, and place a $1, $5, $10 or $20 ‘bet’ on whether they will win or lose. If you’re right, the money goes into your money hoard. If you’re wrong, the money stays where it is. You have the fun of betting and building your hoard without losing your shirt! Talk about a win-win!
This one is a challenge. I’m particularly interested in this one, because it may reach a point when I will have to stop. It will however, give me my pain point – when the amount I’m putting away will negatively impact my monthly budget. However, it will tell me the level of funds I can hoard on an on-going basis without pain.
It is a gradual plan. It starts with saving $1 the first week, $2 the second week, $3 the third week and increasing until Week 52 when you are saving $52. During the last month of the challenge you will have set aside $202 that month, and you will have added a grand total of $1,378 to your money hoard.
So while it starts off easy (who can’t save $1 or $2 per week?) but the longer we go, the more it will take each week to meet the challenge. At what point will you reach your limit, if you reach it?
If you made it through 52 weeks without too much pain, it means you can reasonably expect to hoard about $200 per month by setting up an automatic savings plan. And then maybe start the challenge again.
The Bottom Line
Covid-19 has shaken us all. We have been forced to evaluate what is important, what we can live without, what we need to meet our needs – not just financial, but physical, mental and spiritual as well. We have identified how vulnerable we are and just how quickly our status quo can change. Many business owners are evaluating their businesses to see how they can move ahead in the new reality that will be post-Covid-19 and what they can do to prepare for the next time. One thing we can be sure of – there will be a next time, maybe not tomorrow or the next day…but it will come.
People are looking at their personal situations as well. Many aren’t sure how they will survive a Covid-19 shutdown. They know it will take a long time to recover on many levels. Many are not sure if they will recover. The challenge for all of us will be how to recover our lives, how to move forward and most importantly, how to prepare ourselves and our families for the next time.
Hoarding can be one way – but I think we may change our hoarding priorities from toilet paper to other necessities.
In my personal case, my hoarding priorities are money, flour, yeast, sugar and Chapman’s frozen fudge bars (I can at least try hoarding the fudge bars).
How will your hoarding priority list change?