You’ll still have financial needs when you’re older, so start planning now.
Regardless of your financial circumstances or age, all Canadians want certain things in life. Above and beyond the basics, like a job, a place to live and food to eat, most people want to have the financial freedom for other pursuits, whether it’s a vacation, a child’s education or saving for retirement.
There are often times in our lives, however, when saving for the future seems like an impossible goal, especially if we’re just making ends meet. This is especially true for lower income Canadians who may be struggling to meet their financial needs each month.
For those finding it difficult to save, there are a number of strategies that can help you create a more comfortable future. Here are a few steps to help you get started:
- Track your spending. This might seem like a lot of work, given all your other daily responsibilities, but a budget is the best first step to finding out where your money is going each month and to determine if there are any areas where you can reduce spending. This step may open the door to reallocating some cash toward other priorities, as well as potentially helping you save for the future. Use a simple notebook or there are many useful online budgeting tools available.
- Look into a savings plan. Once you have a better picture of your current circumstances, you may be able to start saving a bit each month. Remember, it’s OK to start small. If $100 per month seems out of reach right now, start with $50 per month. If you pay off an outstanding debt or get a pay raise at work, increase your monthly savings accordingly. A good approach is to stash away your savings as soon as you receive your paycheque (“paying yourself first”). You may find you don’t miss this money as much as you thought and you’ll be amazed at how quickly your savings grow.
- Consider investing to grow your money. There are many different types of accounts and investments that may be suited to your particular financial needs. For lower income Canadians, investing in a tax-sheltered plan like a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA) can be a great way to build your savings in a tax-advantaged way. For an RRSP, keep in mind that since you receive a tax deduction when you make an RRSP contribution, you’ll be taxed when you withdraw these savings in retirement. A TFSA, on the other hand, is a great way to save for shorter-term goals since you can access your money tax-free at any time (as your TFSA contributions are made with after-tax income).
- Talk to a professional. Many Canadians believe they need a certain amount of money to work with a financial advisor, which is not true. A financial advisor or planner can help you with all of these strategies and more. They can help you put together a budget, determine what you’ll need to save based on your current situation, then recommend a savings account that is best for you to start building a nest egg for your future.
- Treat yourself. It’s not easy getting by on a tight budget while trying to save at the same time. However, be sure to treat yourself to a special night out or special purchase every once in a while as a reward for your commitment to disciplined saving. Just don’t let those treats derail you from your long-term plan!
By taking a few simple steps today, you can make a big difference in starting to build your savings.
To read more about topics related to savings and investing strategies, visit AGF.com.
The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.