London, ON: For most Canadians, the most valuable three words in financial planning are to simply "pay yourself first" — a concept found in many personal finance books. "But there's a simple way that this cornerstone of successful savings can be improved," says Talbot Stevens, author of the new book The Smart Debt Coach.

"Starting a pay-yourself-first plan, where you automatically save, say, ten percent of your income before you get a chance to spend it, is a great concept for anyone who isn't already wealthy," Stevens says. But if you've started a monthly savings plan, chances are you're still depositing the same amount you started with, perhaps a decade or more later. "That doesn't make sense," claims The Smart Debt Coach. "To fully benefit from an automatic savings approach, monthly savings plans should also automatically increase each year to keep up with inflation."

Even inflating savings each year by just two percent — the average inflation rate over the last 20 years — is an easy way to make a meaningful increase in a retirement fund, with no sacrifice to your standard of living. If you don't increase your monthly savings plan with wage increases and inflation, your savings commitment actually decreases over time.

Currently, very few financial institutions have the option of automatically inflating a monthly savings plan. But this is changing.

Painless Pay-Yourself-First Approach

Once we recognize that pay-yourself-first plans should have allowed investors to automatically inflate deposits a long time ago, by default, savers can realize other benefits. For those who think that paying yourself first ten percent and living on 90 percent of your income would be too big a stretch, consider what Stevens calls a "painless pay-yourself-first approach."

"Instead of going from nothing to saving ten percent," Stevens suggests, "start saving say five, or even three percent of your income, and inflate deposits each year by ten percent. Because of the gentle, start-small-and-increase-slowly approach, you'll hardly notice the initial impact or the annual increases."

And just like a successful diet or exercise program, by 'leaning into it,' you're more likely to get started and build the savings habit.

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Talbot Stevens is a speaker and author of The Smart Debt Coach. His first books Financial Freedom Without Sacrifice and Dispelling the Myths of Borrowing to Invest have sold almost a quarter of a million copies. For more information, contact Talbot Stevens, by calling (519) 663-2252, or emailing talbot@TalbotStevens.com.

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