Do you want to improve your understanding of your personal finances and how to manage them when living in Canada better? Perhaps you’re looking to build up your savings, find ways to earn more money, or pay off some debt? Well, take a look at the detailed guide we’ve put together below. We’re going to be covering everything you need to know about personal finances, how to have better control over them, and how to make wiser financial decisions. Keep reading to find out more.
Making Savings
One of the biggest concerns people have about their finances is building up their savings. With the cost of living continually rising both in Canada and across the world, it’s understandably hard for some of us to make significant savings. However, there are ways you can help yourself and add a bit more to your savings account each month. We will cover some of the lifestyle choices you can make that will help you save money later in the post. There are many reasons to have savings in place. Whether you’re saving for a holiday, wedding, or just for financial security.
The amount of savings you can make will obviously depend on your income, and no two people’s savings accounts will look the same. Some people prefer to prioritize being able to do the things they enjoy over having a large pot of savings stored away. Whilst others get a buzz from seeing their savings account growing from month to month. Whichever type of person you are, you should try and put at least some of your income away each time you get paid. Having savings in place is essential in situations such as emergencies, unexpected costs, or loss of earnings, as well as allowing you to save for some major occasions in life.
Emergency Funds
As the name suggests, an emergency fund is a type of savings that you do not touch for anything other than emergencies. Unlike your regular savings, you should never dip into these savings for spending money or for a special occasion. Emergency funds are to be used simply for things like covering expenses if you were to lose your job, paying for emergency repairs on your home or car, or for helping loved ones in a financial crisis. Emergency funds don’t need to have as much money in them as regular savings. As a general rule of thumb, emergency funds should be around three months’ worth of your regular income.
Investing Your Money
Some people may also choose to invest some of their money in different areas across Canada. This can have a number of benefits, as your money can potentially grow and accumulate in a way that just isn’t possible with regular savings. If you choose to invest, it’s a good idea to make sure that you still have savings in place, as investing always holds some level of risk and the potential for losing money. When choosing to invest, there are a number of different options available to you. For example, you could choose to invest in property, stocks, and dividends, or mutual funds. You can either monitor your investments yourself or choose your opportunities. You can take a step back and allow someone else to make the investment choices for you.
If you’re investing in stocks and dividends, it’s a good idea to invest in things you have a personal interest in. You should also do as much research as possible into the stock market and companies’ performance to help you make an informed decision. The same is true of investing in property, as making the right call with which kinds of property to invest your money in can either be hugely successful or become a drain on your funds. Seeking advice from those already involved in real estate investment can help you learn useful advice and experience to help you on your journey. You could also try networking to meet new people involved with investment and give you advice for investments and financial decisions. If you’re looking to get started in property and need the capital investment, then you could consider angel investors. These are people that want to start investing in property, but don’t want to be involved in the renovation aspect. Alternatively, you could consider becoming an angel investor yourself if you have the money available to do so.
Working Out Your Tax Calculations
Working out your taxes, what you owe, and how to pay them can be a daunting prospect. However, you’re not on your own, there are resources available online such as this tax calculator in Ontario, available from Wealthsimple, who can help you with your tax calculations. The taxes you pay will vary depending on your income, and it is down to you to do your self-assessment each year. Taxes are due at the end of April, so it’s important to make sure your tax is calculated and finalized before this time. Late tax assessments can receive varying fines depending on how late they are.
Tax can come in multiple forms, either dependent on your income or inheritance, to name a few. Therefore, it will put you in good stead to grow your knowledge on all things tax and ensure you’re getting the best deal possible.
Creating A Budget Plan
A budget plan is essential for anyone seeking to have greater control of their finances, and more understanding of where their money is going. The first step is gathering together all your expenses documents, as this will allow you to work out how much money you’re spending per month. It will also allow you to identify which areas of your life you’re spending the most money in. From there, you can start cutting out unnecessary spending and automated payments that you don’t need to save money. Decide on which expenses you will need to keep in place and prioritize, as you can then build your budget plan around them.
These could be things such as household bills, travel expenses, or car finance. If you have debt, it’s also important that you incorporate how much of this you will be putting towards paying it off after receiving your income. Try and set individual budgets for different financial areas. For example, have a set budget for the week for food, day trips, and money to be put towards saving.
Sometimes it’s easier to make savings as soon as you’re paid to avoid the temptation of spending more money. Have an additional budget set to one side for variable expenses and unexpected costs. Having a budget plan in place means you can keep clearer records of your spending habits and makes it easier to reach your financial goals.
How To Cut Down Living Costs
If your budget plan shows that you’re spending too much in certain areas of your life, then you may plan to cut back on your spending where possible. For example, if you find out your bills will be rising, you can begin researching other providers to help you save money.
If the extra expenses are unavoidable, then you could try cutting back on spending in other areas. If, for example, you’ve taken on a new finance payment or you’re trying to pay off some other form of debt, you may have to sacrifice some luxuries for a while.
It’s also worth taking a look at spending on areas such as food. Such as if you’re buying takeout food too frequently or wasting money on food shopping that you don’t end up using. Simple changes such as swapping out baths for showers, and using public transport rather than your car can also help you to save money.
Credit Cards
When used properly, credit cards can be your best friend or your worst enemy if used irresponsibly. If you’re not careful with them, they can be an easy way to fall into the trap of debt and poor financial decisions. It’s tempting to overspend on things you can’t really afford when you have access to a credit card. The key to using a credit card wisely, is to make sure that you’re not using it to pay for things such as luxuries like designer clothes or holidays, which you will struggle to pay off. If you have a plan to pay the credit card debt off, it can be helpful, but you need to be strict with yourself.
If you’re going to use a credit card to help break up large payments, make sure you have the money set aside each month to go straight to paying off the card. If you delay paying off the debt, it will build interest and snowball into a larger amount of debt that will become increasingly difficult to pay back. Another way to use credit cards to help improve your credit score in a manageable way is to use them for small payments such as a food shop, and then pay them off at the end of the month. This will help build your credit score without creating a large amount of debt you might struggle to find the money for.
