Saving for the future can be very difficult because there are so many priorities competing for each dollar. I see so many people delaying their long-term savings goals because it just doesn’t feel achievable. But the power of compound interest covered in the last blog demands that you start as soon as possible!
There’s a common financial principle that you may have heard about – called “pay yourself first”. This requires you to set up an automatic withdrawal system that puts a small amount away as soon as your paycheque lands. While I absolutely subscribe to this concept, I think it should be changed to “pay yourself third.” First, give a portion of your income away to your church, your favorite charity or your neighbor who is struggling. You should be living a life of generosity, and while this starts and ends with your heart, it’s mostly a matter of prioritized giving. Second, make sure your taxes are covered. And then third, put a small amount into a long-term retirement savings fund. The rest of your income is for you to live within.
Living off the remainder of what is left, after already deducting three parts, can be daunting, to say the least. I honestly think this is true for most people, regardless of where they land on the vast spectrum of income levels. But it's usually doable if some self-searching and disciplined planning are put into place. And I suppose that is the key – you need a plan. It can be simple, but make sure it’s realistic.
Luke 14:28 says, “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?”
Maria Dawes, Portfolio Manager
Capstone Private Wealth