By now, practically all of us have heard about “pay yourself first” as a savings strategy.

The general idea is to put away some percentage of your earnings, and then live on the rest. It sounds simple in theory, but in practice, less so. To that end, Save with SPP took a look around the Interweb to get some ideas about how to actually get going on a “pay yourself first” plan.

The folks at MoneySense see several simple steps you need to take to put your plan into action.

First, they suggest, “zero in on your savings goals.” What are you paying yourself first for – to build an emergency fund, or save up for a down payment, or a wedding or (our favourite) retirement, the article asks.

There has to be a reason why you are directing money away from your normal, bill-paying chequing account, MoneySense tells us.

Next, they recommend, take pen to paper and figure out how much you actually can pay yourself first. Make a list of your monthly “must spends,” like “shelter, food, electricity/heat, phone, transportation, etc.,” the article says. What’s left over is “discretionary” money, which can be spent or saved, the article adds.

If you are saving for more than one thing, you need to figure out how much each month to put away for each category. Then comes the actual “doing” part – automating your savings plan.

MoneySense recommends setting up an automatic transfer each month that moves money from chequing into savings. This amount can be increased when you get a raise, the article notes. Savings should be directed to either a tax-free savings account (TFSA), a registered retirement savings plan (RRSP), or a combination of both, the article concludes.

The Oaken Financial blog notes that guaranteed investment certificates (GICs) can be a good place to stash savings. GICs are locked in for a time, but pay a set amount of interest for a fixed term, the blog notes. High-interest savings accounts pay good interest but allow you to make withdrawals at any time, the blog notes.

The Golden Girl Finance blog says there are apps that take the difficult thinking part out of the saving equation. Wealthsimple, the blog notes, allows you to round up your credit card purchases, so you are actually paying a little extra, with that money being directed to your savings account. So you save a little as you spend, the blog notes.

Save with SPP notes that similar arrangements – where you pay a little extra on debit card purchases, or where a money-back credit card deposits the cashback directly to your savings account – exist at other Canadian banks.

Other ideas that have flashed across the screen of late:

• Banking your raise. You were paying off the bills OK before you got the raise, so why not stick the difference between your former pay and your new pay into savings, and live off the rest? You were the day before the raise!
• Banking your cost of living adjustment. Same concept, but for us lucky pensioners who get cost of living increases, why not direct the increase to savings and continue to live on what you were getting prior to the increase?
• Starting small. You may not stick with a pay yourself first plan if it is overly ambitious. Uncle Joe always said bank 10 per cent and live on the 90 per cent; he did, and he did well, but Joe was a very disciplined spender. Better to start smaller, maybe two or three per cent, and phase it up.

So to recap – you either need to know how much you spend each month to figure out how much you save, or you need to just pick an affordable percentage of your earnings and set it aside. Once you have automated the process, you won’t miss the saved amount, which will grow happily in a savings account, a retirement account, or perhaps the Saskatchewan Pension Plan.

Celebrating 35 years of operations, the SPP permits automatic contributions. They can set it up for you, or you can set up SPP as a bill on your bank website and set up the automation yourself. Either way, the money you direct to SPP will be put away for your future, invested professionally, and – grown – will await you after you get home from the retirement party!

Join the Wealthcare Revolution – follow SPP on Facebook!

By Sheryl Smolkin

For many working Canadians and for those in Saskatchewan, the road to a comfortable retirement is becoming longer and more difficult.  A large portion of the working population is living pay cheque to pay cheque, unable to save, and worried about their local economy, according to the Canadian Payroll Association’s recently released eighth annual Research Survey of Employed Canadians

The survey reveals that only 36% of working Canadians and 37% of those in Saskatchewan expect the economy in their city or town to improve in the coming year.

Many working Canadians are cash-strapped and barely making ends meet. Nationally, and in Saskatchewan, almost half (48%) report it would be difficult to meet their financial obligations if their pay cheque was delayed by even a single week.

“A significant percentage of working Canadians carry debt, have a gloomy view of their local economy and are fearful of rising interest rates, inflation, and costs of living,” says Patrick Culhane, the Canadian Payroll Association’s President and CEO. “In this time of uncertainty, people need to take control of their finances by saving more. ‘Paying yourself first’ (by automatically directing at least 10% of net pay into a separate savings account or retirement plan) enables employees to exercise some control over their financial future.”

Incomes flat, saving capacity drained by spending and debt

“Survey data suggests that household income growth has stalled, as respondents reporting household income above $100K has hardly increased in five years,” says Alec Milne, Principal at research provider Framework Partners. “In fact, real incomes have actually declined when inflation is taken into account.”

While pay has remained largely unchanged, employees’ spending and debt levels have affected their ability to save. Nationally, and in Saskatchewan, 40% of employees say they spend all of or more than their net pay

Despite employees’ challenging financial situations, only 28% of respondents across the country cite higher wages as a top priority.  Instead, an overwhelming 48% nationally, are most interested in better work-life balance and a healthy work environment. In Saskatchewan only 25% prioritize higher wages, while 45% are most interested in better work-life balance and a healthy work environment.

“Clearly, many Canadians are concerned about their financial situation,” says Lucy Zambon, the Canadian Payroll Association’s Board Chair.  “But better work-life balance does not have to mean reduced financial security if you spend within your means.”

Over one-third (39%) of working Canadians feel overwhelmed by their level of debt, an increase from the three-year average of 36%. Debt levels have risen over the past year for 31% of respondents. In Saskatchewan, 35% feel overwhelmed by debt and 35% say their debt level has increased this year. Unfortunately, 11% nationally and 9% in Saskatchewan (among the lowest nationwide) do not think they will ever be debt free.

Similar to prior years, 93% of respondents nationally carry debt (96% in Saskatchewan). Over half of respondents nationally (58%) said that debt and the economy are the biggest impediments to saving for retirement.

Retirement savings fall short, retirement pushed back

Half of Canadians and 59% of Saskatchewan respondents think they will need a retirement nest-egg of at least $1 million.

Unable to save adequately, the vast majority of working Canadians have fallen far behind their retirement goals, with 76% nationally and 74% in Saskatchewan saying they have saved only one-quarter or less of what they feel they will need.

Nearly one-half of employees nationally (45%) now expect they’ll have to work longer than they had originally planned five years ago, primarily because they have not saved enough. Nationally, respondents’ average target retirement has risen to 62, whereas these same respondents’ target retirement age five years ago was 60, before reality set in.

Saskatchewan Pension Plan makes retirement savings easy

The Saskatchewan Pension Plan makes saving for retirement easy by offering all Canadians between the ages of 18 and 71 a flexible series of contribution options that can be modified at any time. Plan members can contribute up to $2,500/year:

• Directly from their bank account or credit card using the PAC system on the 1st or 15th of the month using a semi-monthly, monthly, semiannual, or annual schedule.
• Using VISA® or MasterCard® online at SaskPension.com or by calling toll free, 1-800-667-7153.
• At financial institutions, in branch or online
• By mailing directly to the SPP office in Kindersley

Members can also transfer up to $10,000/year from another RRSP into their SPP account.