I’m not sure if you have heard the news, but effective 2023 the government is increasing tax rates by a flat 10% across the board.

Okay, that isn’t true. But could you imagine the uproar if the government came knocking on our door tomorrow for an extra 10% in taxes?

We would kick and scream until we were blue in the face, but eventually, we would pay the government the 10%. Soon enough, this would become the new normal. We would learn to live on a bit less.

The average savings rate in Canada was about 4% of income before the pandemic started. This isn’t great news. It tells me that there is a lot of Canadians saving 0%.

What if the government mandated a “10% invest in you tax”? Like I had said, this would be uncomfortable, we might throw a bit of a fit, but we would pay our “10% invest in you tax” and carry on with life.

If you were an average Canadian saving 4%, you might be thinking, “I have to increase my savings rate by 2.5 times! No way I can manage that!”

Well, what if I said that you would only have to reduce your spending by 6.25% (it’s the same outcome, 0.90 is 6.25% less than 0.96).

Do you think you could cut spending by 6.25%? I think most people could make it happen. Many of us have a lot of unconscious spending habits, and it’s often enough to easily cover the “10% invest in you tax”.

One of the best habits you can form is automating the process of paying yourself first.