Where does your money go?

How to pay yourself first

A recent study from the Canadian Payroll Association shows that almost half of Canadians live paycheque to paycheque.  When you are stretched that thin, chances are it is impossible to accumulate savings. So, when you are faced with substantial expenses of any kind (emergency or otherwise) you’ve got to turn to debt, which sets the stage for the debt cycle to continue to churn and churn.where does your money go

Want to stop that cycle in its tracks? Change the way in which you live paycheque to paycheque by paying yourself first.

“When trying to make ends meet, savings inevitably falls to the end of the priority list. It’s not that people don’t want to save, it’s that they don’t feel that they can afford it,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.

In reality, savings isn’t as much about finding extra money, but is about being strategic with the money you’ve got.  You need to ask yourself, where does your money go? It’s about creating a habit that is seamless and incredibly helpful in setting yourself up for financial success.

Here are some tips on how to pay yourself first.

Do you read your paystub?

The cornerstone of good financial management is financial literacy, which will help you understand your options to stretch your income further.

People don’t always take the time to really understand their paystubs. Make a habit of getting familiar with each and every line item. What is your gross vs. your net (take home) pay? How much is being deducted?  What is it going towards? You are likely paying a variety of things, like income tax and Employment Insurance benefits. You may also notice employer specific items you are paying for- like benefits, vacation pay, charitable donations or even company-sponsored savings.  There may be areas to scale back your deductions, increasing your take home pay, but you won’t know unless you examine it thoroughly.

Here is a good resource from the Government of Canada on how to read payslips.

Direct deposit

If this is an option with your employer, elect to have direct deposit into your bank account. That means that you can count on money arriving at the same time in your bank account, which can help support your savings efforts.

Automatic savings

Your employer may offer automatic savings plans, where a specified amount of savings is taken right off your paycheque. Hands down, automatic savings deductions are the best way to accumulate savings because it’s done right at the source.

If your employer doesn’t offer this service, you can DIY your savings, using the same principle. Set up an automatic savings program with your financial institution. They’ll deduct what amount you choose and put in a savings account (or wherever you choose) each pay cycle.

Every little bit counts

People tend to discount the importance of savings sometimes when they feel that they’re not accumulating enough to make a difference.

Rest assured, every little bit counts. It’s about setting up the habit of savings. You’d be surprised that once you’ve decided to pay yourself first, how quickly the savings grow.

Are you ready to ditch the debt cycle in favour for setting yourself up for long term financial success? We can help you get on the right track. Call one of our trained credit counsellors at or get started with our online debt analysis.

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