A Request from Your Future
Learning about your spending habits today will pay dividends tomorrow
By Wayne Prins, Executive Director
My wife and I got married in the summer of 2003. I was about to start a new job with a very modest salary, and my wife was still a student entering her final year of university. We lived in a small apartment in east Edmonton, we shared an old two-door Chevrolet Cavalier, and we had far more debt than cash in the bank.
At the time, I read an article about the importance of understanding your spending habits. If you intend to manage your spending, you need a clear understanding of where your money is going.
In the first months of our marriage, we kept track of every dollar spent. We kept every receipt and added the amount to a spreadsheet. At the end of the month, we reviewed the totals. The early hassle of this exercise quickly became routine, and the awareness of our respective money habits helped us avoid tension due to money. We did this for a year, and I can tell you it was transformative.
Around the same time, we heeded the advice of parents and experts to start saving for the future. Even when you think you can’t afford it, put a little bit away and leave it there, they advised, and budget the rest of your spending around it.
To help members save for their future, CLAC manages two retirement savings programs, a group RSP and a defined contribution pension plan. These plans are expertly managed, and they serve members who participate in them extremely well.
Pension plan contributions, excluding voluntary contributions, are locked in, meaning the money isn’t accessible for withdrawal until retirement age. But contributions to the group RSP are not locked in, so members are able to withdraw it as they wish.
The rate of withdrawals from the group RSP plan is high, and I’ve always found this disheartening. Sure, some of the money is withdrawn to be sent to another retirement vehicle, but we know the majority is withdrawn as cash for immediate spending.
I am sensitive to the affordability crisis we are living through, and I fully appreciate the financial difficulty many find themselves in these days. But the withdrawal trends are the same today as they were three years ago (during record low interest rates), five years ago (before COVID), and ten years ago (when inflation was two percent).
The trend applies equally to those making less than $20 per hour and those making more than $50 per hour. This suggests a broad lack of awareness of spending habits and a common failure to commit to saving for the future.
I’m not a financial professional, so my advice is limited to this simple, but strong message: make it your business to understand your spending habits, seek expert advice to make a personal financial plan (available to members on myCLAC.ca), and stay committed to it for the long run.
To those of you who are on track, well done! To those who aren’t, get on it. Trust me, your future self with thank you for it.