You might be surprised to know that there really isn’t a secret code among the one percent
Smart investing boils down to a few practical, commonsense factors that anyone can use to build a financial future. The only secret to success is sticking to the plan.
Start saving now!
You often hear the phrase that it is best to start early when it comes to saving and investing. I’ve never found this advice helpful though, since you can’t go back in time and start saving at an earlier age. However, regardless of your age, you can always choose to start saving today rather than waiting until tomorrow. The longer you save for, the more you will accumulate.
Set a savings goal
Another phrase that you might have heard is that you need to save 10 percent (or even 15 to 20 percent) of your salary. While this might be a good goal to aspire to, it may not always be possible depending on your financial situation. With that said, you should still set a savings goal for yourself. You can start with an amount that you think is manageable and then increase it over time. Whether that is a percentage of your salary or a dollar amount ($100 a month), it will be easier to save if you have a target to work towards.
Pay yourself regularly
Once you have a savings goal, pay yourself first. Set up automatic payments that go from your chequing account into an investment or savings account on the same day that you get paid. By having your money move automatically to a separate savings/investing account on the day that your pay cheque arrives, you won’t even miss the money from your account or feel the urge to spend it.
Save your raise
If you get a pay raise this year, consider viewing it as more money to save rather than more money to spend. The same goes for bonuses, tax refunds and even inheritances. Now, you don’t have to save every single penny from such windfalls, but you should set a target of how much you want to save before the money arrives in your bank account. This way you won’t be tempted to spend it once it’s in your account!
Investigate your workplace saving programs
Many companies offer savings programs such as pension plans, RRSPs and/or employee stock plans to workers.
On top of this, most employers offer to match a certain percentage of the contributions that you make to such plans — this is free money! You can think of it as your employer paying you more to save.
One issue with such plans though is that you aren’t always automatically enrolled in them. This means that you could be leaving free money on the sidelines. When you go to work tomorrow, speak to your HR department to learn about what savings plans are available, how to sign up and what you can do to maximize your employer’s matching contribution.
Here are three smart financial goals that everyone needs to make — like stop arguing about money!
Jordan Campbell, CFA, is a financial adviser associate at Manulife Securities.