Turn your spending habit into an investing habit
If you feel you’re always scrambling at the end of the month to get by, and your savings are smaller than you’d like (or even nonexistent), don’t panic – it’s not too late to get started. Here are seven ways to kick-start your efforts with effective investing habits.
Updated 
5 min. read
1. Create good habits:
New research suggests that making – or breaking – habits hinges on a key part of your brain. So, does that mean you can’t become a better investor if you’re a natural-born spender? Not necessarily. Starting a regular investing habit is something anyone can do. It just takes planning and a little discipline. It involves finding ways to stay motivated and following through with your plan. You may be more likely to invest on a regular basis if you set reminders on your phone (like a calendar alert when you get paid), reward yourself every time you reach a milestone to keep the momentum going, or sign a contract with yourself (as funny as that sounds – it may just work).
2. Aim to invest 1/10 of your income:
Let’s say you’re 25 years old, making $40,000 annually. You invest 10% of your income each year earning a 7 per cent annual return. By age 65, you’d have over $798,000 saved. And just think, that amount could grow even more if you increase the percentage you invest.
3. Find the right account:
You can increase the amount you invest by decreasing the amount you spend on taxes and fees. A TFSA offers a tax-free way to invest for your short- and long-term goals. That’s because, although you fill your TFSA with ‘after-tax’ income, every dollar you earn through investments in your TFSA is tax free.
On the other hand, you can put money into your RRSP before paying taxes (and deduct your contribution from your income), but you’ll pay tax when you draw it as retirement income. Another key difference is that there’s no penalty for taking money out of your TFSA early, but there is a penalty if you tap your RRSP before retirement. Bottom line: you have lots of options. If you need help making sense of it all, it’s probably worth talking to an investment professional.
4. Add investing to your monthly budget:
Think of investing like paying a bill. You wouldn’t splurge on a new smartphone instead of paying your phone bill, and you wouldn’t take a vacation instead of paying rent, right?
Treating investing like a bill (as boring as it sounds!) can help make it easier to prioritize. When you get your paycheck, you should always pay your bills first (including your ‘investing bill’). Then you can spend whatever’s left over on treats for yourself!
5. Automate your investments:
Building an investing habit is a lot easier when you don’t have to think about it. Automating your investments each pay period ensures that the money you earmark for investing gets where it needs to go, instead of being spent. There are lots of ways to make automating your savings a breeze. BMO, for example, offers a Continuous Savings Plan which lets you automatically transfer funds to your savings or investing account.
6. Set a goal:
Setting goals can be a powerful way to improve your investing mindset. A tangible goal gives you a finish line to work towards, whether it’s saving money for a dream vacation, buying a car or enjoying a comfortable retirement. Make sure your goals are specific, measurable, achievable, relevant and time-bound. And don’t forget to write them down. Creating a visual reminder of what you hope to achieve – one that you can see every day – can help reinforce the savings habit.
7. Stick to your plan:
If you struggle to gain traction with your investments, getting an outside perspective may be what you need to move forward. This is where having a financial professional look at your investment strategy can come in handy.
Ready to start investing?
Start investing online with BMO InvestorLine Self-Directed.
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