Do you want to know the secret to both financial success and a happy marriage along the way?
The first key is to make sure you’re paying yourself first. This can be a real problem for people that are either not employed on a regular basis or are self-employed with a volatile income.
But the habit of saving and paying yourself first, every month is one of the major keys to not only having enough money at the end of your life, but making sure that you and your family are happy along the way.
Firstly, what does “pay yourself first” really mean?
It’s simple, just think of yourself as the main creditor in your life. If you’ve got rent to pay, food to buy, car payments to make etc, you need to put yourself at the front of the line – before you spend on anything else.
When you do that, you’re establishing yourself and your family as the priority.
You’re subconsciously making yourself and your family the most important thing of all of the other things that need to be dealt with that month.
There has always been and always will be difficult reasons for not doing this. But the simple reality is that the people that save for themselves every single month from an early age end up the happiest, very often healthiest, and almost certainly wealthiest amongst us.
Most people do it the other way around. They pay their bills, then tell themselves they deserve to have some fun, but at the end of the month there is rarely anything left over to save. This is a bad approach.
Note, I’m not saying that you shouldn’t have any fun or pay your bills. What I am saying is that if you do it in that order, you typically won’t have any money set aside at the end of the month. And if you do leave a few dollars in your savings account, when some unexpected bill comes in, that will be quickly swept away and you’ll be starting from scratch.
A Better Approach
A better approach is to take money and put it somewhere where it’s just a little bit of a hassle to get at. In other words, just a little bit more difficult than running down to the bank ATM.
If you use an RSP, it typically requires a trip down to see your financial planner and tax consequences thereafter when you withdraw. So you’re probably not going to do it in order to fund that ‘must have’ vacation.
The Easiest Way
By far the easiest way to do this is to automate a transfer from your bank account to an investment plan a day or two after your paycheck hits your bank period. That way, there will be money there, which will be allocated into a different account for you. This creates a tax deduction if it goes into an RSP.
Most importantly, you’ll get used to living off of what’s left.
It’s frequent for me to hear people tell me that they just couldn’t live on anything less.. These are often people that have dual incomes sometimes exceeding $100,000/year. But the reality is of course that many people and families are able to get by on substantially less. Doing so in the early years of a marriage has two huge benefits which are typically overlooked during the financial planning process.
The first is the benefit of stability. Financial stress is among the top reasons for families breaking up.
This can be caused by a number of things, including the lack of an agreement between spouses as to an appropriate amount of money to spend and save. (Many people refer to this as a financial consciousness, which I’ll discuss in a future article).
The second is the incredible effects of compounding which occur towards the end of a career.
As an example, you may not think that $100 a month will do anything for your retirement.
And you’d be right if you’re starting saving at 55 but that same $100 a month starting at age 20 can be the difference between retiring at 55 or having to work well into your 70s, simply because of the age you were at when you started.
The Master Key
As cliche as it may sound, saving money automatically every month is a master key to both a successful marriage and life.
If you’d like to see just how much of a difference this can make, give me a call. I’m happy to draw out some projections, which will visually show just how important this can be for you and your family.