The Octo-Investor

Jul 05, 2019 | Adam Bosak


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Managing multiple financial demands while trying to invest for future goals can leave you juggling competing priorities like an eight-armed mollusc. Fortunately, there are things you can do.

Canadians consistently state that they want to save to meet their long-term goals, especially their retirements. The problem? Too many competing demands on their limited resources require them to juggle multiple commitments today, forcing them to skimp on, delay or even skip altogether their long-term goals’ savings plans.

How we spend: the eight-tentacle monster

So, where does all the money go? More often than not, it’s to meet life’s necessities and immediate commitments. By percentage of income spent* these are the top eight areas:

Shelter – 29%

Transportation – 19%

Food – 14%

Household operations, furnishings and equipment – 11%

Recreation – 6%

Health and personal care – 6%

Clothing and accessories – 5%

Education and reading materials – 3%

Savings rates: the octopus in the room

Where do Canadians’ savings land on the list? Though it varies from year-to-year, unfortunately, based on StatCan’s most recent numbers, it’s around 1.1%, and near an all-time low**. Yep, not great. But, despite multiple competing priorities, Canadians are still saving, even after direct contributions to government and company pension plans. That’s commendable and, combined with the right strategies and tactics, can pay off over the long term.

Even a little goes a long way

Fortunately, there are relatively simple steps to help save and build nest eggs to reach long-term goals:

Review your budget: Are you aware of everything you are spending money on? List your spending and see if there are ways to save money by eliminating items or choosing more sensible options. Even an extra $100 per month can make a huge difference over time (see Step 5 below).

Enhance after-tax income: Maximize your after-tax income by ensuring that you are using all of your allowable tax deductions and credits, and you are making proper use of government-sponsored tax-sheltered savings plans, such as RRSPs, RESPs and TFSAs.

Establish a financial plan: Start by setting out your short-, medium- and long-term goals. Setting out SMART goals – specific, measurable, attainable, relevant and time-bound – will allow you to determine what you need to save for, and to properly prioritize those goals.

Start a regular investment plan: Even a small amount invested early and regularly can, over time, grow into something significant. If it’s automatically debited from your account? It’s a simple “set it and forget it.”

Let the market help you: Saving as little as an extra $100 a month over 30 years – or $36,000 – with an average annual compounded return of 6% can generate savings of nearly $100,000. $10 more a month? You can hit almost $108,000!

Today’s octo-investor juggles multiple financial commitments. But by following these straightforward steps, you can get to where you need to go – without feeling lost at sea.

To learn more, please contact us today.

*Survey of Household Spending, Statistics Canada (2016).

**Household savings rate, Statistics Canada (Q4, 2018)

***Octopus icon made by Freepik from www.flaticon.com