Whether you're just learning the ropes of personal finance or a seasoned investor, it's always important to take a step back and reassess your goals and the steps required to reach them.
The sooner you start investing, the sooner your money can work for you. The more time you allow your money to be in the market, the more time your money can compound. Generally you should start saving and investing right now, no matter what age you are. Even if you can’t save very much, start by saving something.
Learn more about the power of compounding:
Think about where you want to be financially in the future, both short-term and long-term. When settings financially goals, take into consideration your retirement, education, debt or insurance needs. For most Canadians, Retirement Planning is a major goal that requires considerable financial commitment.
Any goal, regardless of the amount, can best be achieved by systematically saving. When taking steps to achieve your goal, consider investing regular amounts to your plan during the year as opposed to attempting to come up with large amounts when it is required. After you have developed and implemented a plan, it is important to conduct annual reviews. Your financial situation should be reassessed at least once a year to account for any changes in your life cycle or economic conditions.
While you may not wish to drastically alter your lifestyle, a budget will determine the availability of funds to set aside for savings. You can use our budget calculator to find your yearly income, savings, spendings, and total cash flow.
Pay yourself first by establishing a program for regular savings with funds solely devoted to meeting your financial and life goals.
Each time you receive your pay cheque, take a percentage of it and either invest it or save it. There is no correct answer in how much one should save, everyone has different financial situations that limit how much they can save. Generally you should try to set aside 20% of your income for debt payments, savings, and investing. This 20% shouldn't be for essentials such as housing or food, nor should it be for fun such as enterainment or eating out. If you aren't making a stable income, even saving one or two percent will cumulate over time.
From the Canadian Couch Potato FAQ.
The Couch Potato strategy is a technique for building a diversified, low-maintenance portfolio designed to deliver the returns of the overall stock and bond markets with minimal cost. The strategy can reduce a typical investor’s costs by as much as 90%, while at the same time beating the majority of mutual funds and professionally managed accounts.
The strategy–also called index investing, or passive investing–has been around for decades, though it has become far more popular in recent years, as new products and online discount brokerages have made it easier to implement. Anyone can now build and maintain their own portfolio using index mutual funds and exchange-traded funds (ETFs).