Warren Buffett's 'spend what's left' rule: Why Canadian high earners keep ignoring it

High-earning Canadians are among the worst offenders. As income climbs from $80,000 to $120,000 to $200,000 and beyond, spending tends to match it. The Canada Revenue Agency (CRA) sets annual limits on registered retirement savings account contributions — in 2025, $32,490 for registered retirement savings plans (RRSPs) and $7,000 for tax-free savings accounts (TFSAs) — that most high earners are not fully using. The opportunity cost is substantial.

One way to follow Buffett’s ‘pay yourself first’ is to automate contributions to savings plans before discretionary spending is possible. This turns it into a savings plan and not a willpower solution. It’s a structural solution to a cash-sequencing problem — and the mechanics are simple enough to put in place this week.

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What is lifestyle creep — and why does income make it worse?

Lifestyle creep is the gradual normalization of higher spending as income rises. It is not one large decision. It is a pattern of small upgrades that become baseline: the neighbourhood, the vehicle, the vacation, the kids’ activities. Each is individually defensible. Together, they absorb the raise before it ever reaches a savings account.

The trap is tightest at income levels where Canadians feel financially stable but have not yet locked in a savings habit. A $9,000 annual RRSP contribution, started at age 35 and earning a modest 6% annually, reaches roughly $357,000 by age 65. The same contribution starting at 45 reaches about $126,000. The decade of delay costs more than money — it costs the time that makes compounding work, when your money isn’t just saved but works to earn, as well.

In this hypothetical example, the numbers illustrate the cost of deferral. For precise projections, a licensed financial planner can model outcomes based on individual income, marginal tax rate and investment horizon.

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How does automation actually work — and why does it matter?

The mechanics are straightforward. Most Canadian financial institutions and online brokerages allow pre-authorized contribution plans that pull a set dollar amount from a chequing account on a schedule — weekly, bi-weekly or monthly. The key is timing: The transfer should be set for the day after the paycheque clears, not the day before rent is due.

When the contribution leaves before discretionary spending is possible, it is no longer a decision. It becomes infrastructure. The remaining cash can be used for spending which tends to produce more disciplined choices.

For RRSP contributions, employer group plans with payroll deductions accomplish the same result. For TFSAs, the automation typically requires a small amount of setup at a bank, credit union or brokerage, but most platforms offer it as a standard feature. Many robo-advisors make recurring contributions a core part of onboarding.

How much should Canadians at each income level target?

There is no universal savings rate, but the following framework — framed as a starting point, not advice — reflects commonly cited guidance from financial planners working with salaried professionals:

Income between $80K and $100K: At this level of income, a combined RRSP and TFSA contribution target of 10% to 15% of gross income is a reasonable baseline — roughly $8,000 to $15,000 per year.

Income between $100K and $150K: A target of 15% to 20% is more commonly recommended, particularly where employer pension coverage is limited or absent.

Above $150K: Above $150,000 and especially above $200,000, full RRSP room utilization becomes a meaningful tax-reduction strategy in the current year, in addition to the long-term savings benefit. For instance, the 2025 RRSP limit of $32,490 allows a $150,000 earner to shelter roughly 22% of gross income from tax — assuming their individual deduction room supports it. A licensed financial adviser can confirm your personal deduction room through your CRA Notice of Assessment.

The TFSA is complementary rather than competing. Since a TFSA contribution does not produce a current-year deduction, but withdrawals are tax-free at any point. For Canadians who have been eligible since 2009 and have never contributed, the accumulated room has reached $109,000 in 2026.