The Key to Consistent Investing? Paying Yourself First

Consistency is a key ingredient of success in many activities – including investing. And one technique that can help you become a more consistent investor is paying yourself first.

Many people have the best of intentions when it comes to investing. They know how important is it to put money away for long-term goals, especially the goal of a comfortable retirement. Yet they may only invest sporadically. Why? Because they wait until they’ve taken care of all the bills – mortgage, utilities, car payments and so on – before they feel comfortable enough to write a cheque for their investments. And by the time they reach that point, they might even decide there’s something more fun to do with what’s left of their money.

How can you avoid falling into this habit of intermittent investing? By paying yourself first. Each month, have your bank move money from your chequing or savings account into the investments of your choice. By taking this hassle-free approach, rather than counting on your ability to send a check, you can help ensure you actually do contribute to your investments, month after month.

By moving the money automatically, you probably won’t miss it, and, like most people who follow this technique, you will find ways to economize, as needed, to make up for whatever you’re investing.

You already may be doing something quite similar if you have a RRSP or other retirement plan at work. You choose a percentage of your earnings to go into your plan, and the money is taken out of your paycheque. (And if you’re fortunate, your employer will match some of your contributions, too.)

But even if you do have a RRSP, you could also contribute to a Tax-Free Savings Account (TFSA) – which is a great vehicle for your pay-yourself-first strategy. You can put in up to $6,000 per year to a TFSA, so, if you are able to “max out” for the year, you could simply divide $6,000 by 12 and have $500 moved from your savings or chequing account each month into your TFSA. Of course, you don’t have to put in the full $6,000 each year.

You might think such modest amounts won’t add up to a lot, but after a few years, you could be surprised at how much you’ve accumulated. Plus, you may not always be limited to contributing relatively small sums, because as your career advances, your earnings may increase significantly, allowing you to boost your RRSP or TFSA contributions continually.

In any case, here’s the key point: When you invest, it’s all right to start small – as long as you keep at it. And the best way to ensure you continue investing regularly is to pay yourself first. If you do it long enough, it will become routine – and it will be one habit you won’t want to break.

Barbara A Armstrong
Financial Advisor, Edward Jones Investments
P:  250 384 8722
TF:  1 877 342 3280
Barbara.Armstrong@edwardjones.com