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Scotia Wealth Management

The number one tip to achieve financial freedom

February 11, 2019

The first step to achieving financial freedom is typically to cut your non-essential spending. But once you have done so, you need a plan to make sure that money doesn’t just get spent on other non-essentials.

Since remembering to transfer money into savings can be a hassle – one that you might forget to do once in a while – we have a simple solution for you:

Pay yourself first.

To do so, arrange for money to come out of your account automatically each month before any other spending or bill payments occur. From there, you can direct the funds to the savings or debt repayment method of your choice. That way, your savings are on auto-pilot. Instead of promising yourself to set money aside each month, it just happens.

The general rule of thumb is that you should save at least 10% of your net earnings – the money you have left over after income tax. For example, if you earn $2000 a month after tax, you set aside $200 for savings. Of course, if you can save more, by all means go for it. The amount is really up to you, and you should choose a level that will not leave you exposed to those pesky No Sufficient Funds charges.

In terms of options for how to automatically withdraw, one popular method is called a Pre-Authorized Contribution, which your financial advisor can help you arrange at any time. Also, if you are employed full time in a company that offers a savings program, consider having your monthly savings redirected from your bi-weekly income into a Registered Savings Plan.

Whatever method you choose, the key is to systemizing your habit, so that you do not have to remember to put away the money yourself. It is done automatically. And keep in mind that the earlier in your career you can start this kind of saving, the more money you will save because you are taking advantage of the power of compounded earnings over time.

 

Call  or email me at richard.dri@scotiawealth.com or connect with us in the following ways:

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This publication has been prepared by Scotia Capital Inc. and is intended as a general source of information only and should not be considered as personal and/or specific financial, tax, pension, legal or investment advice. We are not tax or legal advisors and we recommend that individuals consult with their qualified advisors before taking any action based upon the information contained in this publication. Opinions and projections contained in this publication are our own as of the date hereof and are subject to change without notice. While care and attention has been taken to ensure the accuracy and reliability of the material in this publication, neither Scotia Capital Inc. nor any of its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of such material and disclaim any liability resulting from any direct or consequential loss arising from any use of this publication or the information contained herein. This publication and all the information, opinions and conclusions contained herein are protected by copyright. This publication may not be reproduced in whole or in part without the prior express consent of Scotia Capital Inc.