07 Dec 2011 6 Comments
Ever wonder what you would tell your 18-year old self if you had the chance? I would tell my younger self to always pay myself first. Well, that and stock tips like buy Apple and winning lottery ticket numbers, but that’s just wishful thinking! Even though I have sufficient savings to enjoy the lifestyle I have today, I could be truly financially independent if I just had some foresight. Sure, I saved as much as I could, but I always paid myself last. Rent, restaurants, vacations, cars, education; I paid everything and everyone else first. Whatever was left over, I put into savings. Sometimes, there wasn’t enough left over for savings. But that was never a priority. If I decided when I was 18 to always put 20% of my gross income aside, I could only imagine where I would be right now.
So, my cheat for Level 3: PAY YOURSELF FIRST! Commit to paying yourself first by setting up an ASP (automatic savings plan). Technically, the government already takes their cut before you even see your paycheque, but you should be next in line. I recommend having it automatically come out of your chequing account every time you get paid so you don’t even notice (hopefully) that it is gone. Then you allocate the remaining money to whatever other priorities you have in your life.
You can set up your savings account to automatically withdraw money whenever you have a paycheque coming in. This can be done with PCF, but if you find that the easy access you have to the savings account is too tempting, I recommend using ING Direct.
ING Direct. Another online bank that I use solely for saving purposes. All their chequing banking services are free (of course!), but I continue to use PCF for this purpose as their network (CIBC) is much easier to find around the city than ING Direct’s network. One quick note: if you ever use email fund transfers (EFT), ING Direct allows you to send these for FREE while PCF charges a $1.50 service charge. So I have used ING Direct to send EFTs, and they’re a great way to get money to someone without actually having to meet up.
Anyways, what I like about ING Direct is that the savings rate is comparable to PCF (1.50%), and you can set up different savings account for different categories. You can set up individual accounts for emergencies, retirement and vacation for example. The interface allows you to set up individual goals for all the accounts as well as tracks how close you are to hitting your target as well as calculates the amount of time it would take. Also, it will require a few days to get the funds out of ING Direct to your chequing account, so hopefully this helps to deter you from sabotaging yourself!
So start today! If you can’t afford to put 20% away every paycheque, start with something. Anything. $100. $50. Even $20 helps. Once this becomes a habit and you realize that you don’t miss this amount, slowly increase the dollar value. Just set it, and forget it! (Bonus points for anyone who can tell me what infomercial that is from!)
To hopefully entice you to start paying yourself first, ING Direct is currently offering a Christmas promotion; set up an account with them before December 31, 2011 and deposit a minimum of $100, and they will give you $50. (That’s a 50% return!)
Use the Sign me up! Tab on the far right and choose the Savings Accounts link, and finally the Investment Savings Accounts.
Even if you don’t set up an ASP, it’s still $50 someone is throwing at you for the 5 minutes of time it would take you to sign up. Easy work if you can get it! Also, if you do sign up, you can use my Orange Key (35864006S1), and I’ll get $50 too! Every little bit helps, right?
How do you save each month? Do you currently pay yourself first? Do you think having the savings coming out automatically without any extra effort from you each month will help you save more?
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