Many books have been written on how to save money and how to get rich quick, yet there are relatively few millionaires running around in attestation to the efficacy of these schemes. Generally, the notion is always the same, “pay yourself first” they say. Some authors prescribe a savings value based on percentages of income, for instance 10% or 20% should be set aside each pay.
It sounds so easy, yet saving money is a very real challenge for most Canadians. The government has made it even more challenging to save money by making it easier for Canadians to liquidate savings.
Canadians are encouraged to use RSP or TFSA investments for down payments as first-time home buyers and to repay debts. The money taken from such plans theoretically remain in the plans, at least for tax purposes. A small percentage must be repaid to the plan each year to avoid the tax consequences of withdrawal. From a statistical point of view, the money is still saved although that is clearly not the case.
Some sources report that nearly half of all RSPs in Canada have been raided by savers for the purchase of real property or the repayment of debts.
Saving money ought to be a priority, it ought to be the first not the last item on the budget wish list. While the percentage value suggested by some writers may not be realistic, the idea of prioritizing is. Try putting a very small amount $10 per month and increase it incrementally over a long period of time so that you can adjust your budget to the increases with stressing your ability to pay your bills.
Think about making corresponding reductions in non-necessity spending such as smoking, alcohol, entertainment and eating out. For more than half of Canadians, who live below the poverty line, saving money is not likely to happen, but for those who do earn more than the LICO putting a small amount aside each month may be reasonable.