Do not save what is left after spending, but spend what is left after saving.
Warren Buffet
In the book The Latte Factor https://davidbach.com/the-latte-factor-class/, which I wrote about in a previous post, the author talks about paying yourself first. I really like his wording as it speaks to an important philosophy – that of taking care of your future before anything else. How does it work? It’s simple really, just ensure you are taking a portion of your pay each week and setting it aside. You pay your rent, your bills, and the tax man, but you need to pay yourself as well. And it’s important. Many of us, including myself, used to see the money left over after bills as free to spend. But that is a dangerous attitude, and it can get you into real trouble. One study from the U.S. concludes that 40% of Americans are only one paycheque from poverty. https://fortune.com/2019/01/29/americans-liquid-asset-poor-propserity-now-report/ A comparable Canadian study says 39% of Canadians are in the same predicament.
How much should you save? That is a difficult question to answer as I think it depends from individual to individual, but even if you’re only saving $10 a week, it’s still worth while. Those ten dollar bills will add up – and they may save your neck if the unexpected ever happens.
I’ll be setting up a TFSA next week. I’m excited about it as I’ll arrange to have a percentage of my pay automatically put into that account. That way I don’t even have to think about it, but I know I’m paying myself first.
By the way, after I set up my TFSA I’ll write about the particular TFSA I have chosen. It’s one where I can do my own investments, and if my hubby’s investment gains are any indicator, I’m sure to earn at least 30% every year. I’ll show you how I plan to do that.
My Money Management Journey 