Start Saving Now
A recent report showed that almost 40% of Canadians have no savings at all. In addition, 21% of Canadians are making only the minimum payment on their credit cards and another 14% are regularly paying late fees as well. Saving for retirement is not as hard as we make it on ourselves.
Although we’re not as bad as the US where research points to those without savings as high as 70%, we do share their inherent resistance to savings. So why aren’t we saving more? The usual answer to that question is “I can’t” as many people feel there is nowhere left to cut from their budget. When put into the context of maintaining their current lifestyles, that’s probably true. When you’re already living month to month, the only way to start saving is to either reduce your lifestyle or increase your income. Unfortunately for most non-savers, increasing income usually just means increasing their lifestyle too. Too many people say they’ll start saving once their income goes up. People should instead focus on reducing their lifestyle and getting into the habit of saving now.
The reality is that downsizing a lifestyle is just as hard for high income earners as it is for those that earn less. For some, downsizing might mean selling expensive cars and homes and cutting back on the fancy restaurants. For others, it could be cutting out cable tv and buying generic brands of household goods. Regardless of the income level, the majority of us just can’t see the options we have as cutting back on our lifestyle seems like a fate worse than death.
I encourage all of you that haven’t started saving yet to go through your budget and see what you can honestly do without. Make your own coffee in the morning instead of a stop at the local Tim Horton’s. Cut out the extra channels on your cable package and find out that basic cable is all you really need. Start packing a lunch instead of going out each day. Don’t know where to start? For the next two months, write down everything you spent money on each and every day. Keep a spreadsheet on paper or your computer and put every last item in there. At the end of the two months, go back and put together a summary. You’ll be surprised how much you spend on some “little things”.
Fidelity Canada’s website has a great calculator that shows you the value of cutting down on your budget (link below). From your spreadsheet exercise above, go online to this calculator and see how much those little savings can add up. For a 30 year old starting out a new family, cutting back $100/month on their spending will put an extra $133,722 in their retirement portfolio at age 65*. If it’s all you can do for now, start with $25/month to get your savings mentality started.
We cannot change what we refuse to confront and putting these changes into effect can be very difficult to get started. Fortunately, the difficult times will be short lived and before long you will settle into the new lifestyle. The pleasure you get from the extra splurges will be replaced by the weight taken off your shoulders from knowing your retirement is on track. You’ll be surprised how much better you sleep at night.
NOTE: Insurance products provided through multiple insurance carriers. Mutual funds products are offered through Investia Financial Services Inc.
*Based on 6% rate of return.