Are you wanting to go on vacation but don't think you can afford it? Are you thinking about your retirement but aren't sure if you have saved up enough? Do you need to build an emergency savings so you have some peace of mind? Would you like to invest and watch your money grow but can't even imagine how you can come up with the cash? Maybe you just feel like there is too much month left over at the end of your money.
Whether you are saving for vacation, retirement or another purpose, by paying yourself first, you can watch your money grow - little by little. For example, by saving $50 each paycheque, you could save up $1,300 in one year.
Nearly 40% of Canadians who took part in a recent national survey said they use the "pay yourself first" concept to build investment wealth. This concept can also be used to save for other purposes. By moving money automatically from a paycheque or bank accounts into another account, it's impossible to spend it before you save.
The greatest benefit of paying yourself first can be psychological. After a few months, you'll adjust to the lower cash flow, and won't even miss the money. As it accumulates - out of sight and out of your wallet - you'll build financial security in a meaningful way.
A common way to pay yourself first is through regular RRSP contributions. It's easier to invest monthly than to scramble for cash during the seasonal RRSP rush. Plus, if you choose to invest regularly in mutual funds,* you can leverage the market's ups and downs - your money buys you fewer fund units when prices are high and more units when prices are low, or at a discount.
If you make automatic monthly RRSP contributions, you can ask the Canada Revenue Agency (and Revenu Quebec, if applicable) to allow your employer to withhold less tax from your pay. If payroll deductions aren't possible, authorize a transfer from your bank account to coincide with your payday.
Or, you can set aside money into a Tax-Free Savings Account with as little as $25 a month contributions. With this type of account, you can watch your money grow while earning interest - tax free.
Professional advice can help you determine how much you can afford to put on automatic each month, find money where you least expect it, and highlight any alternative savings programs available. We can help you look at your goals and determine the best savings plan to meet your needs.
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