Are people saving enough for their future? – Making of a Millionaire
Recently a study by BDO Canada Ltd. came out with some alarming statistics about how Canadians live and how we save our money. So let’s take a look and see what the study found out.
What did the study show?
Of the Canadians that participated, over 50% said they had little disposable income (living paycheque to paycheque), and about 1/4 of respondents said that their debt is overwhelming.
More than half of respondents are carrying credit card debt. 1/3 of those people said they couldn’t afford to pay off their remaining balance if they had to today.
40% of respondents have non-mortgage debt totalling over $20,000.
About 40% of respondents have no savings for retirement. Which will result in about 70% of Canadians not having enough savings to sustain their retirement.
Of the people polled for the survey, the statistics are getting worse. More people believe younger generations will have to work longer to meet ends meet, while saving for retirement. More people believe that even if they save for retirement, they still won’t have enough money. Women suffer greater than men when it comes to saving: women have a more difficult time saving for large purchases, and spend more on necessities.
Why is this the case?
You could attribute this problem with saving for the future to a variety of options. Inflation or the rising cost of living, rising house prices in Canada, maybe subscriptions that we all have now (Netflix, Amazon Prime, iMusic, Spotify, etc). Are we spending our money more foolishly? Do we just have bad habits when it comes to money?
The inability or difficulty to save isn’t a new concept, in fact it goes back centuries. The problems we are facing today really aren’t that different than any of the problems we (well our ancestors really) have faced in the past.
A common reason why Canadians aren’t saving, is they believe they can’t afford to. If we can’t afford something, that usually means we are living beyond our means. Maybe we believe our money is better spent elsewhere, or we don’t have the longterm mindset needed to prioritize things like saving for retirement.
When we live beyond our means, we are essentially spending more money than we are making. Maybe compared to others we don’t spend a lot, but that isn’t a fair comparison. We have to look very objectively at our own situation: what do I make? What do I spent on necessities (rent/mortgage, utilities, bills, food, etc)? What do I spend on myself, or fun stuff? Where can I save some money?
We should have the mindset of ‘do something your future self will thank you for’.
Regardless of the statistics, the source, or even the problem. Any issues about money typically always come back to the lack of having good financial habits. It’s not your fault. We aren’t taught any practical money skills throughout school. It’s solely up to us to learn and develop good financial habits to help our future selves out.
What can we do about it?
The quick and easy answer is: learn about good financial habits. The long answer is: learn about good financial habits.
It will take time, but it’s worth it. Just like with investing, you see the biggest gains down the road. In the beginning learning a new skill can seem like another job, but the good news is that eventually it will pay like a job too. If you can figure out ways to save a little money here and there, you end up with a lot of saved money in total. The hardest part, is taking the first step.
Here are some easy steps you can take right now:
- Set aside 5% or 10% of your take home from each paycheque. Put it into a separate savings account so you don’t spend it and it can earn you some interest. Start small, and over time you should see your spending adjust, and you might be able to save a little bit more. Once you’re comfortable with the amount, start putting towards goals like a downpayment or retirement.
- Sign up with your employers group plan! It is always surprising how many people don’t take advantage of free money. An employers group plan should take money straight off your paycheques and match it up to a certain amount. This should give you a great start for saving for retirement. And half of the contributions are free money to you!
- Review your budget, specifically what you’re spending money on. There are a lot of necessary purchases, you won’t be able to get rid of all of your bills. But there are things you can probably cut out. You might even be shocked to learn how much you spend on certain things. But don’t worry, it’s okay. Ignoring a negative, or a bad habit only increases it. Being aware of what you’re spending money on and asking yourself ‘is it worth it?’ or ‘what am I sacrificing to buy this?’ can help you reevaluate your purchase.
Whether you’re needing to improve your financial situation, or you just want to avoid being in a bad financial situation, you’re in the right place. The hardest step is the first one. If you’ve made it this far, then you have the right mindset to improve your situation.
What you need to do is keep the momentum going! Make a list, start with some smaller or easier tasks. Anything you need to do to ensure you keep moving in the right direction.
Do you have any tips you’re using or have used to improve your financial situation? If so, leave a comment and let us know! We can all learn something from each other and help each other out.