Money management

“The Canadian Payroll Association's survey, released yesterday, revealed 59 per cent of Canadians would really feel the squeeze if their pay was delayed by only a week. It also found 50 per cent of Canadian employees can't save more than 5 per cent of their pay for retirement, though the recommendation is 10 per cent.”

(from today’s Globe and Mail Life section)

I didn’t know about the 10% rule. I’m definitely not putting aside 10% of my paycheque towards retirement savings right now. I think we’re doing well in the money management field and the not-living-a-lifestyle-where-we-spend-everything-we-earn field, but is this what I should do once all my/our debt is paid off? Speaking of debt, I’m stopping at the bank on my way home tonight to pay off the entire balance of my personal loan. Woohoo! One loan down, one credit line to go and we’re debt-free!

“While it's common sense to try to squirrel away cash for retirement and emergencies, many of us are unwilling to give up our lattes, our big-screen TVs and our dinners out, marketing professor Dilip Soman says.

"A lot of people will tell you they want to save and they're trying hard but they can't," says Prof. Soman, who studies behaviour economics at the University of Toronto's Rotman School of Management.

"I think the big issue is they adapt very quickly to a lifestyle," he says, stressing that there are always ways to save a few bucks.

"People are creatures of habit and once you're used to whatever that might be - getting a cappuccino every day in the morning - then not having that is a loss." Young people have the most difficulty saving money, he says. They start earning at age 18 or 19, a time when retirement seems a long way off. After, or even before, paying student debts, they get used to spending every penny they make.

The mass movement to direct payroll deposit has also made it hard for spendthrift Canadians to become savers, Prof. Soman says. People are more likely to treat money automatically transferred to their account as spending money than they would a cheque they have to physically cash.

"It's hard to keep track of how much you've been spending," he says. "Before you know it, it's gone and you're back to square one waiting for the next paycheque." He suggests setting up automatic payment transfers to your savings account after each payroll deposit.” [Note to self: to do.]