What does a mortgage payment and a paycheque have in common?? Well, aside from one of them on its way IN your bank account and the other on its way OUT, both transactions are AUTOMATIC every single month! Both individuals and businesses alike, all love the power of automation!
WHY? …because automation takes away all the emotional decision making out of the equation!
Did you know that if you TAKE AWAY one’s ability to CHOOSE, one can become financially independent much much faster?!
Emotion is the NUMBER ONE REASON why people can’t achieve financial independence. They end up tampering with their monthly savings and instead of investing it like they should, they get DISTRACTED and end up using the money for other impractical reasons like buying that new Prada bag or perhaps getting the latest iPhone in the market!
You see when you automate things, it becomes MINDLESS! Just like a mortgage payment, you have no choice on the matter because it just gets taken out automatically from your bank account whether you like it or not! And much like taxes paid to the government, YOU HAVE NO CHOICE! The government even chooses to use the power of automation right before we even walk out of the store, since we have to pay HST on all products & services!
So with that said, saving money should be approached no differently! You SHOULD automate a specific set amount each month to your saving bucket!
There are various ways you can have this done via your bank. The most common way is to instruct your bank to set up a monthly PPT (Pre-authorized Payment Transfer) to whichever account you want your savings to grow in. Whether you decide to have your money invested in Stocks, Bonds, Index Funds, or GIC’s is totally up to you! You simply tell your bank what investment vehicle you’d like to go with and they can set that up for you!
A few quick tips when you set up your AUTOMATED SAVINGS:
- Pick a comfortable amount that you’ll be okay with to mindlessly transfer each month (without spreading yourself too thin). That way, you don’t even see this money sitting in your chequing account, with a good chance that you’ll end up using it for something else at that point!
- Don’t be content with the set amount you initially started off with! You should be increasing your contributions as time goes by!
- If you get a raise or bonus at work, great! Just pretend you never got one to begin with and deposit this amount in your savings! Your FUTURE YOU will thank you for it! If you’re already living great with your normal budget, then there’s no need to touch that extra bonus you got, so why not just save it!
The two biggest ‘saving buckets’ you should be filling up as early as possible, is your TFSA or RRSP (preferably BOTH!!). But if you have to pick one, the TFSA should be the priority between the two! We shall talk more about the differences between the two on my next topic: TFSA vs RRSP
On a last note, the power of automation DOES NOT have to be just all about your savings! You can also use automation with your other finances like paying bills! Here is a quick (super fun!) helpful video by the automation masters at WealthSimple! …talk about taking off the stress & pressure of personal finance off your shoulders! 😉
