5 Good Money Habits to Boost Your Retirement Savings

29_F_Social_02_CDNThink back to your most recent savings goal. How long did you have to save in order to reach it? Was it a concert ticket or some new shoes that took a few weeks of budgeting? Was it a big-ticket item like a new computer or a summer vacation that took a year or two of planning in advance? Perhaps you’re currently saving for an even more ambitious goal: a car, a wedding, a down payment on a home? Although savings goals vary from person to person and range in size and scope, it’s likely that your longest-term savings goal will be your retirement.

Saving for retirement poses some unique challenges: How are you supposed to prioritize retirement savings against the long list of more immediate goals? How are you supposed to find the motivation to prepare for something that’s decades away? How can you quantify the amount you will need to save when you have no idea what your future will look like?

The good news is that you can boost your retirement savings by practising the same good money habits that apply to smaller savings goals. Read on to find out which money skills will also level up your retirement savings plan.

1. Eliminate roadblocks. No matter what combination of financial goals you have in the works, this is the top priority. Think of it as creating the right environment for your savings to grow. Savings thrive when they have long stretches of uninterrupted time in which to accumulate and compound, so it’s in your best interest to eliminate any obstacles that threaten those ideal saving conditions. Focus on paying off any high-interest debt—you know, the kind that sucks up money that could otherwise be going toward your goals (credit card debt is an example). Revisit the terms of any loans you’re paying off and do a little research on potential consolidation or refinancing options—you might find a way to pay down your debt more efficiently and free up some extra funds for your savings goals at the same time. Eliminating roadblocks also means having a healthy emergency fund in place, so that your savings progress doesn’t get wiped out by an unexpected job loss (a good starting point is three months’ worth of expenses).

2. Automate savings. So your emergency fund is set up and your debt-management plan is in place—now is a great time to see if there are ways to automate your savings at work and at home. Can your employer automatically deduct your retirement contributions from your paycheque? Can you set up your online banking system to regularly transfer a certain amount to your savings account? Look for ways to make the act of saving easier, more consistent and less time-consuming.

3. Picture your goals. One of the reasons it’s hard to get motivated about saving for retirement is that it’s an abstract concept—especially when pitted against more self-explanatory savings goals like “new car” or “tropical getaway”. Take 10 minutes to ask yourself a few basic questions and to design your ideal retirement: do you see yourself relaxing at the beach, or enjoying a beautiful home and watching your family grow, or pursuing a passion or hobby you couldn’t make time for in your working years? Does your ideal retirement mean indulging yourself, or would you prefer to downsize and keep things simple? Would you want to continue working (part time or in some capacity) throughout your retirement? Do you picture moving into a new space? A new city? A new country? Fleshing out the details of an otherwise ambiguous savings goal allows you to ground the goal in reality and to get excited about it—and it’s easier to contribute to a savings goal you’re actually excited about.

4. Practice living with less. Increasing contributions to your savings goals (usually) means decreasing your monthly spending. This doesn’t necessarily mean adopting a super-frugal lifestyle; however, if that’s what you want to do to get to your goal sooner, go for it! Create some monthly challenges (like a month of packed lunches, or a month of free things to do) to see the impact of spending a little less. Put the money you would have otherwise spent towards your savings goals. If you live with a partner, challenge yourselves to live off of one income, and put the other toward savings. You will soon discover that spending a little less here and there does not require a complete lifestyle overhaul. Understanding the give-and-take of budgeting is a powerful skill, and it’s easier to cut spending when you can put it in the context of achieving a goal. Cancelling a cable package “just because” is not an enticing idea—but what if you knew that cancelling that cable package and investing the money saved would allow you to retire four years sooner? Having the right motivation can make it easier to save.

5. Increase savings along with income. This tip is an extension of living with less. Try to maintain your current lifestyle and expenses even as your salary rises over time. As your income increases, increase the amount you contribute to your savings goals. It’s very easy to slip into a slightly larger lifestyle after a raise. It’s equally easy to treat unexpected income as “extra money”, whether it’s a bonus at work or $20 in a birthday card from Grandma. There’s nothing wrong with rewarding yourself from time to time, but limiting your living expenses—even in times where you don’t have to—will free up more resources for your long-term savings goals. More importantly, you’ll be better prepared should your income levels take a hit. Allow your savings to scale up with your income, but don’t let your expenses scale up along with them!

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The good money habits outlined above will create a routine that motivates you to find a few more dollars to put toward retirement. Even little changes can make a huge impact on a long-term savings goal that has decades to compound and grow. Because time is on your side, there is a lot of value in prioritizing contributions (even small ones) to your savings goals now. Choose a couple of tips to put into practice this month, and notice the impact it has on your budget—and on your financial peace of mind.

Use Psychology to Build a Budget You’ll Stick With

When you start looking for financial advice (or any kind of advice, for that matter), experts will share their take on what’s “good” and what’s “bad”. In personal finance, there are some classifications that we can all agree on: Debt is bad. Emergency funds are good. Overdrawing your account is bad. Earning interest on your savings is good.

Aside from the obvious examples, the guidelines are a bit murky; plus, the financial advice gurus often contradict each other. One expert will tell you that spending money is “bad” and saving money is “good”. The next will say that saving money is “bad” and investing it is “good”. Another might tell you that there are some “bad” investments and some forms of “good” debt.

If you’re waging an inner battle of good vs. bad every time you whip out your credit card or peek at your monthly bank statement, it’s probably time to give your views on budgeting a shakeup. Start by losing the desire to classify everything as “good” and “bad”. There are good and bad ways to spend money, just as there are good and bad ways to save it. Following that logic, there are good and bad ways to budget.

A good budget is one that, quite simply, works for you. It allows you to meet your needs and plan for your goals, and—most importantly—it motivates you to keep on budgeting. Successful budgeting systems vary wildly in their approach and in the tools you need, but they tend to have the same three actions as building blocks:

  • PRIORITIZE
  • TRACK
  • REWARD

These building blocks not only help you organize your finances, but they also have the ability to boost your motivation (and there’s real science to back that up). Read on to see if your current budgeting system has all three building blocks in place.

  1. PRIORITIZE

What it means: Prioritizing your goals means taking a little personal reflection time and writing a few things down. Prioritizing your goals should not be confused with categorizing your expenses—we’re not talking about combing through your budgeting spreadsheet and pondering whether “fast food” and “takeout” should be combined into a single category. We’re not even talking about what you think you “should” be saving up for. No, we’re talking about your goals. What do you want your life to look like over the next few years? Is it your dream to train for a new career? To have an adventure in a foreign country? To throw an awesome wedding? To start your own business? To raise a family? Allow your goals to be a judgment-free zone—goals and dreams are as diverse as the minds and personalities behind them. In most cases, goals reach beyond the familiar trifecta of “pay off student loans, buy a house, save for retirement”.

Why it works: Prioritizing your goals gets you buzzing about what your money can do for you. There are a couple of motivating factors at work here. Number one: by prioritizing your goals, you are asserting your beliefs and your values. You are also reminding yourself of why you’re willing to adopt a budgeting system in the first place. Studies show that you’re more invested in activities that you see value in—and although budgeting literally deals with values (the dollars-and-cents kind), including your personal values in your budgeting system is what generates determination and stamina. Creating and sticking to a new routine is a pain if you think you have to or you should do it; it’s a lot easier if you’re mindful of why you want to do it. Number two: prioritizing your goals is a great starting point because it reminds you that you’re in charge. You have a say in where your money goes. Social scientists point to autonomy as being a critical element to sustain motivation—and what’s more autonomous than realizing that your budget is a collection of choices you make in order to create the life you want?

Get started: Grab a pencil and paper. Ask yourself what you want. Think about it for 10 minutes. Write the answers down. Realize they are achievable.

  1. TRACK

What it means: Tracking your expenses means being aware of where your money is going as you spend it. This is the part where financial advice experts start to disagree again: some swear by tracking your expenses with good ol’ pencil and paper, others swear by budgeting apps and spreadsheets, and some push more unique approaches like portioning your spending money into envelopes. The good news is that it doesn’t really matter how you go about doing it, but just that you do it. When you track your expenses, a couple of things come to light right away. You start to realize that every transaction, no matter how big or how small, is either contributing to a goal or taking away from it. There’s no such thing as “buying a pumpkin spice latte just because”. You will soon see that the cost of your fancy coffee comes out of somewhere—ideally out of your budgeted spending money, but potentially out of your vacation fund or your groceries or your student loan repayment plan. The second thing you’ll notice is that the longer you’ve been tracking your expenses, the more you’ll see evidence of your progress.

Why it works: Yet another critical element in sustaining motivation is competence, or your ability to do something well. As it turns out, we thrive on being reminded that we’re improving. On the surface level, tracking your expenses helps you to identify your spending patterns and to course-correct when necessary. More importantly, by tracking your spending, you’re also tracking your efforts. You’re creating a record of your progress along with a record of your transactions. Before long, you’ll have tangible evidence of how your actions and your follow-through are contributing to a calmer, happier financial life. You’ll see how capable you are of budgeting. You’ll find it easier (and even exciting) to keep your budgeting winning streak going.

Get started: Try out a new budgeting system today. Browse the App Store or do a quick web search, or pick up a book on the topic. Don’t spend much time evaluating or comparing budgeting approaches. Just pick one and try it out.

  1. REWARD

What it means: Rewarding yourself means encouraging and celebrating your progress as you create healthier financial habits. Don’t be afraid to use some creativity when defining your personal finance milestones and rewards. Milestones can be time-based (e.g., using a budgeting app every day for 30 days), achievement-based (e.g., paying off all credit card debt) or increment-based (e.g., having your emergency fund reach $500, $1,000, $2,000…). Rewards can take on many forms as well; material rewards are the most common, but consider incorporating time- and experience-based rewards into the mix too (for example, you can list “permission to spend an entire day just vegging out” as a reward).

Why it works: Quite simply, rewards feel good. They highlight our achievements and renew our commitment. As kids, we loved earning those gold star stickers, and although that familiar achievement/reward structure practically disappears in later years, it doesn’t mean that rewards are any less effective in adulthood. By assigning rewards to the milestone of any given goal, you’re creating added incentive and boosting your motivation. When you earn, claim and enjoy a reward, your brain gets an extra hit of dopamine, which in turn increases your focus and drive.

Get started: Set a timer for 10 minutes and brainstorm two lists: a list of budgeting milestones and a list of possible rewards. After the 10 minutes are up, assign the rewards to your milestones. They should reward your effort realistically and be super exciting to work toward at the same time. When you reach your milestones, claim your rewards.

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The act of creating a budget contributes to your ability to follow it through. It solidifies your values, it promotes competence and it highlights your achievements as you work through it. Incorporating Prioritize, Track, Reward into your budgeting method of choice will boost your motivation while tackling your personal finance goals at the same time.

The Credit Union Lady, 1914-2017

It is with heavy hearts that we share that Ruth Allan, known as ‘The Credit Union Lady’ has passed away at the age of 102. Ruth affectionately became known as The Credit Union Lady while administering the School Savings program for First Credit Union, formerly known as Powell River Credit Union, beginning in 1957. After 23 years, Ruth retired from the School Savings program in 1980. More than 35 years after her retirement people still stopped her in the community to recount their memories of her and those School Savings program days. It was a legacy she cherished. Central1 captured the essence of Ruth’s story as ‘The Credit Union Lady’ in this short endearing video released last year.

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Ruth’s impact on the lives of thousands of children was significant and long-lasting. In First Credit Union’s 76 year history no one has influenced the lives of so many or been remembered so warmly; her spirit will live on in the hearts of those she touched.  In honour of her impact and her significance in First Credit Union’s history, a $1,000 scholarship will be introduced in her name. The Ruth Allan Scholarship will be awarded to a member in grade 12 in the Powell River area who has demonstrated the capacity to save for and contribute to the cost of their education, and who has made a commitment to making a difference in the lives of others.

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Image of 3-year old Phil Carriere and Mrs. Ruth Allan with other children from Kelly Creek School, 1963. Photo provided by C. C. Searle Photographs.

 


 

History of How “The Credit Union Lady” Came To Be

(Sourced from: Start Small, Dream Big – The 75 Year History of BC’s First Credit Union by Linda Wegner):

Following the death of her first husband, Ruth Allan and her two sons moved to Powell River to be near her sister. Her first jobs in Powell River included being employed at a local five-and-dime store, at Powell River Paper during World War II, and later, in the Mill’s paper plant. She remarried into a family of credit union members and consequently joined the Powell River Credit Union in 1949. Ruth was once again widowed when her second husband, Peter Alton, died in an accident at the Mill. A daughter had been born to the couple and now Ruth was left to support herself and her three children.

Ruth was asked if she would like to take over the School Savings program in 1957. Ruth recalls the Directors of Powell River Credit Union visiting her to ask if she was interested. It was an opportunity that proved providential in meeting her financial needs and demonstrated yet more evidence of the commitment of the credit union to care for its members. “It was absolutely perfect for me, being able to be home when my daughter came home from school”, explained Ruth when interviewed for the First Credit Union’s 75th anniversary book.

Ruth’s daughter Evelyn recalls that being the child of The Credit Union Lady carried  responsibilities. “Everyone in town knew her and if I was bad they’d tell on me; I could get away with nothing!” she said, laughing.

When she first began with the School Savings program, each student had a card with their name on it. When students brought their money, the appropriate card would be pulled and deposits recorded by hand. With the assistance of other volunteers, Ruth’s responsibilities included visiting ten schools each week. Ruth remembered many good things about her time with the School Savings program including the little boy who used to come, barefoot, across the field to bring her his nickel. Ruth attended his graduation and saw him go off to university.

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At First Credit Union’s anniversary, one former student fondly shared Ruth’s impact on her life. The student developed the habit of saving through the school program. She would bring her twenty-five cents to school each week and saved enough so that when she got married, she had enough money to purchase her husband’s wedding ring.


 

Ruth, The Credit Union Lady, remained as administrator of the program for twenty-three years and a passionate First Credit Union member for the duration of her life. She will be greatly missed, and fondly remembered for her legacy as The Credit Union Lady.

 

Keep or Toss: How Long Should I Hang Onto My Financial Documents?

Every year, it’s nice to do a bit of “financial spring cleaning” and declutter your filing cabinet, your desk drawers, and the various hiding places where miscellaneous scraps of paper tend to accumulate and multiply. Read on to find out what you should be saving, and what’s OK to shred.

Keep forever

If you’re long overdue for some organization in the paperwork department, start here! This category includes all the super-important life stuff that’s usually issued to you only once (and therefore is total pain to replace):

  • Birth and death certificates
  • Social Insurance cards and ID cards (even expired versions)
  • Passports (even expired versions)
  • Marriage licences and divorce decrees
  • Copies of wills, trusts, and powers of attorney
  • Adoption papers
  • Records of paid mortgages
  • Safe-deposit box inventory

 

Your “keep forever” documents should be kept in a secure place. A locking file cabinet in your home is a popular choice, but consider upgrading to a safer alternative, such as a fireproof safe in your home or a safe-deposit box at your credit union or bank. Also consider scanning these documents and having them backed up on the cloud (and password protected, of course) so that you can access them remotely and quickly in an emergency.

Keep for 6 years

This category includes all supporting documents for your income tax return, plus a couple of other odds and ends. This may seem like a long period of time, but it’s not an arbitrary number—6 years after filing a return is how far back the Canada Revenue Agency (CRA) can go to audit a tax return.

An audit is an evaluation of your tax return to verify its accuracy and to ensure compliance with tax laws. Many people associate being audited with having committed tax fraud or some other shady financial behaviour but, in fact, a number of taxpayers are audited on a random basis each year. If audited, you are required by law to provide the documentation that supports the claims made in your tax return. In some cases, additional information may be required in order to verify a claim you’ve made—it might just be a matter of providing a cancelled cheque, a receipt or a bank statement. In other instances, the audit may take place on-site (meaning at your residence or workplace) or at a CRA office. Being well-organized is the best way to make the process as quick and painless as possible.

So, what sorts of documents should you hold onto for 6 years?

  • Income tax returns
  • Any forms that support income or a deduction on your tax return (e.g., receipts, cancelled cheques, T4 slips)
  • Records of selling a house or stock (documentation for capital gains tax)
  • Records of paid-out loans
  • Records of sold investments
  • Mortgage documents
  • Medical records (including bills, prescriptions and health insurance information)

Keep for 1 year

This category mostly consists of monthly statements. A good rule of thumb is to keep your monthly statements for the current year, and then shred them once you’ve reconciled them with an annual statement. The exception is any statement needed for tax purposes—those get grouped into the “keep for 6 years” category.

  • Bank statements
  • Pay stubs
  • Quarterly investment statements
  • Cancelled cheques

Keep for 45 days

  • Credit card statements

Shred credit card statements after 45 days, but hang onto those statements that you may need for business, for taxes, as proof of purchase, or for insurance.

Keep for 30 days or less

  • ATM slips
  • Utility and phone bills

ATM slips can be tossed once you’ve checked them against your monthly bank statement. Utility bills and phone bills can be shredded after you’ve paid them, unless they contain tax-deductible expenses.

Keep as long as active

This bonus category is a catch-all for agreements and contracts that are active for varied amounts of time:

  • Warranty information
  • Insurance documents
  • Vehicle titles and loan documents
  • House and mortgage documents
  • Pension records/retirement plans

You’ll want to hang onto the records in this category for at least as long as you own the asset. For major purchases, stapling the original purchase receipt to the user manual or warranty information will keep everything in the same spot, should you need to make a warranty claim. Documents relating to improvements and upgrades on your home or vehicle should also be saved alongside your title and loan papers.

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Sorting through financial documents is a pretty straightforward process once you figure out how long you need to hang onto specific types of documents. Doing a periodic cleanup will save you time and hassle in the long run, and will keep your desk drawers and filing cabinets clutter-free in the meantime!