Saving money is always in vogue

Every spring, the change in the weather inspires many of us to shop for a new wardrobe. Whether that means adding the season's colours to your existing clothes or buying those must-have accessories, it is the time to step out in style. But given the recent statistics on consumer debt, I am not certain that everyone can really afford to splurge.



Canadians owe $1.3-trillion in mortgages and consumer credit. According to a Statistics Canada study from the end of 2009, Canadian households had $146.20 in debt for every $100 of disposable income. This compares to $90 in debt for every $100 of disposable income at the beginning of the 1990s. In turn, our personal savings rate has fallen from a peak of 20% in 1982 to 10% in the 1990s and further to 4.6% by the end of 2009.



I know it is tough to beat the instant gratification that comes from a new pair of strappy sandals, but it is essential to strike the right balance between spending and saving. While fashion styles may come and go, making money is always in vogue.



The next time you are out shopping, take a moment to consider your spending habits. If you pass a shoe store with a big sale sign in the window, do you drop in and treat yourself to one pair or buy everything available in your size? It's a good deal, right?



I don't suggest that you save until it hurts, but I also don't recommend that you spend as if there's no tomorrow. Consider adding discipline to your spending and saving. If you do, it will be possible to live well and retire well.



Only 31% of eligible tax filers contribute to their registered retirement savings plan (RRSP) and use about 6% of the total contribution room available. Being able to find the right balance between enjoying disposable income today and building an investment portfolio for retirement is key.



It's never too early to start investing - the earlier, the better, as additional time can allow an investment to grow and benefit from the power of compound interest. We all know this in theory, but the difference between an early and later start should make people sit up and notice.



For example, starting at age 25 and contributing $100 a month to an RRSP to age 65, which earns an average annual return of 6.8%, compounded monthly, will give you a tidy nest egg of approximately $234,500. Everything else being equal, if you were to wait and start saving at age 35, you would have accumulated roughly $112,700 by age 65 - less than half.



The foundation of your saving strategy needs to be your investment plan. There are many correlations between building a great wardrobe and building a solid investment portfolio.



Although we all want the "on trend" look each year, the foundation of your wardrobe should be those classic, timeless items that never go out of style. The same strategy works for your portfolio: The bulk of your holdings should be the equivalent of your "little black dress" - high-quality, reliable and always in style.



Consider building a well-balanced, globally diversified portfolio of investment grade bonds and blue-chip dividend-paying stocks of companies that are leaders in their industry, have strong balance sheets and great management teams.



Although it may be tough at first, paying yourself first means that instead of simply living for the moment, you'll build the foundation for a wealthier life in the long-term.



We need to stop trying to keep up with the Joneses - they're broke! - and start creating wealth by spending less then we earn. That discipline will always be in style.







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