Advertisement
Simple strategies to boost your financial knowledge (and your bank accounts) while easing your debts.
If you find yourself in debt, you’re not alone: Nearly three-quarters of Canadians have some type of outstanding debt, according to Statistics Canada. It’s a natural part of the financial life cycle, especially when buying a car, paying for post-secondary costs or buying a home.
And who doesn’t want to find a way to save more? Countless studies show Canadians are not saving enough towards retirement, and many current retirees report wishing they had socked away more along the way.
Whether you’re juggling credit card balances or trying to boost your savings, here are some strategies to help you get there faster.
If you’re serious about saving, you need to set a goal so you know what you’re saving for. Whether it’s a trip to Japan you hope to take in a few months or saving up for retirement, having a very specific goal will help you stay motivated and on track.
The best way to get on track to saving is to spend less than you earn. Tracking your spending—either through a daily journal or an app—can help you do this. Some banks offer spending apps through your online banking, but third-party apps like Mint and You Need a Budget (YNAB) are also popular.
Consider trimming expenses. Once you know how much you’re spending monthly, you can decide what areas you can reduce or where you’d like to cut back on so you can meet your savings goal.
For those with low to moderate incomes, paying off debt—including a mortgage—is the best tax planning you can do. That’s because you don’t pay taxes on the capital gains on your principal residence and there’s no tax on the return you get for getting out of debt.
Set up an automatic transfer of funds to a savings account, tax-free savings account (TFSA) or registered retirement savings plan (RRSP) so that a set amount—say, 10% of your gross monthly income that comes off your paycheque automatically. This way, it’s not a question of finding the willpower to save every month. So save first for the goals that you have and then spend what’s left over.
Slash your taxes by making sure you use TFSAs and RRSPs properly. Hint: Generally speaking, if you make less than $50,000 annually, TFSAs work best. If you make more than $50,000, then saving in an RRSP works best.
To control spending, it helps to eliminate temptation. Forget roaming through malls and bookstores, where impulse buys are common. Instead, hit the gym or join a book club to stay busy and engaged.
One strategy to pay off debt quickly is the stacking method. List all of your debts in descending order from highest interest rate first on down. This strategy requires you to make minimum payments on all of your debts while directing the remainder of your funds towards the loan with the highest interest rate. Once that one is paid off, do the same for the next debt on your list.
A second method to pay down debt is the debt snowball strategy. This is where you focus on paying your debts from the smallest amount to the largest by making minimum payments on all your debts and putting the remainder towards the one with the lowest amount—say, a credit card. Paying off a small debt can lead to a feeling of accomplishment, which is an important motivational factor for those who may feel overwhelmed by their debts.
The TFSA limit for 2023 is $6,500. Try to max it out if you can. And remember, your room is cumulative, meaning the unused amount you can add to your TFSA has rolled over. RRSP room is a bit different because it’s a percentage of your earned income, and it gets reduced by a pension adjustment if you’re in a pension. Like your TFSA room, it too carries forward and is based on all your cumulative RRSP room and past contributions.
Compare the best savings accounts in Canada
Newsletter
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
Think you're too young for life insurance? Buying early can help save on premiums.
Economists share how the temporary tax cut and relief cheques may play into Canada’s growth picture.
Which ETFs should you invest in? Which ones best suit your risk tolerance? What about personal ethics? Check out...
Looking for gifts with great value? Our editors share ideas that are thoughtful, useful and even cozy—plus they can...
If you’re looking for a financial advisor or planner, learning about their credentials can help you choose the right...
Nvidia doubles revenue in one year, Canadian inflation moves in the wrong direction, Target misses badly, Walmart beats earnings...
Here’s how to get your free ticket to attend the MoneyShow virtual expo.
Nvidia beats earnings expectations as investors eye demand for Blackwell AI chips.
Nvidia is Wall Street’s most valuable company. How it got there, by the numbers.
The world’s biggest cryptocurrency topped USD$98,000 on Nov. 21. As it inches ever closer to six figures, investors wonder:...