Paying Yourself First

RFebruary is the time for thinking about retirement and income tax savings for those of us living in Canada. This year’s Registered Retirement Savings Plan deadline is March 3rd. I have spent part of this evening looking at a number of retirement income calculators (there are several on the internet) and realised that I am a long way from a comfortable retirement. So I have decided to take a pledge to pay myself first. The idea is simple, every time you receive money from any source, put a portion into a savings account before you do anything else. The money is your payment to yourself, or more accurately, to your future self. Many of the sites recommend putting a full 25% away, but not all of us can afford to put that much away, especially if we also have any debt that needs to be paid down. To figure out how much you can manage, use worksheets (Gail Vaz-Oxlade has some great resources on her website to calculate your fixed expenses and keep track of your spending. For me, ten percent is about all I can manage right now, and I have been putting $25 into an RRSP account every two weeks. According to the retirement income calculator results, I need to be putting close to $8000 aside each year, but I will not let this discourage me. As of today I pledge to put ten percent of my income into a savings account each and every pay day. I will let you know how it goes, and encourage you to take the pledge with me.

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