As a newcomer to Canada, learning how to manage your finances is a must. Aside from investing in our finances, it is equally essential we
As a newcomer to Canada, learning how to manage your finances is a must. Aside from investing in our finances, it is equally essential we put up a strategy to save our finances as we carry out our daily activities.
When we put up a strategy as to how to save our finances, we would set ourselves up for a secure future and a boost in achieving long-term goals.
As much as this is easy to write about, finance management for newcomers is quite complicated. That is why we got you. Stay tuned.
Practical Ways To Manage Your Finances As A Newcomer New To Canada.
Here are practical ways a newcomer can manage their finances in Canada:
Be Cautious Of Fraudsters
It is only possible to manage your finances if you have it.
Truthfully, being a newcomer puts you in a vulnerable position to fraudsters because you have little to no knowledge of how the Canadian banking system works; it is obvious why you would be a primary target to fraudsters.
You should get guidance from trusted individuals or the Bank on how the Canadian Banking system works.
When doing a financial transaction, you should be cautious until you know how the Canadian banking system works.
Read also: How Canada’s Banking Systems Work Step By Step
Boost Your Credit Score and Credit History
A credit score is made of a three-digit number that lenders, including banks, use to confirm if you qualify for some types of loans or goods purchased on credit.
A good credit score can hand you a lifeline in the future when you have a tremendous financial hurdle.
You must try your best to boost your credit score in Canada, as this would make you eligible for a higher amount of money you can borrow when you are financially incapacitated.
When you do this, you will contain unexpected events that can undo the efforts you put into managing your finances over the years.
Set Up A Financial Calendar
Setting up a financial calendar is a practical way of managing your finances as a newcomer to Canada.
Reviewing the debt you have in terms of tenure, the principal, and a payment plan will enable you to focus on how to clear it off. You also come to terms with reality if it is beyond you to take another one.
If you are not conscious of this, it can undo your efforts to save.
Managing your debt goes a long way in saving you from the painful situation of spending all your finance.
Budget Your Finance
Budgeting your expenses is one of the practical ways you can manage your finances as a newcomer in Canada.
You need to know the worth of your net income and expenses. You do not want to go overboard by allowing your costs to exceed your net income. It is a recipe for bankruptcy.
When you make a budget list, you will be able to tell the most important things you need and sieve out something that might be unnecessary on a scale of preference.
By so doing, you will be in charge of your lifestyle, not the other way round. The budget should be realistic.
One of the strategies to enable you to do this is the ’50-30-20 concept’.
You would have to remove all expenses from your income to use this concept. Then would pend 50%, 30%, and 20% on your needs (housing, groceries, transportation), wants (new shoes, dinners out, hockey tickets), and savings & debt repayment (downpayment for a house, college savings, retirement funds) respectively.
You should put up everything on this list. Leaving even little things like monthly fixed costs (insurance products, cell phone) and your regular subscriptions (gym, Netflix, etc.) can put you off balance, making it impractical to follow the budget.
Understanding Canadian Income Tax And Deductions
Understanding the Canadian income tax and deduction is also a practical way newcomer can manage their finance in Canada.
Canadian income tax varies across different provinces. It is effortless to overlook these deductions as they come as subtle expenses.
It might surprise you how these regular deductions increase income in a month.
Taxpayers provide financial aid to Canada’s robust healthcare system and various social services via the deductions they take from you.
Canada has federal and provincial income taxes that are deducted from people’s accounts. So, for example, if you live in Quebec, there is a Quebec pension plan.
These deductions are for Canada’s Employment Insurance (EI) program. It is given as financial assistance to those who are sick, pregnant, or caring for a new child.
It is also given to the unemployed workers and their kids in Canada.
Read also: 4 Things You Need To Know About Credit Scores As A Newcomer To Canada
Having A Shared Account For Household Expenses Only.
This method is for a newcomer couple.
It demands them to have a joint chequing account to pay for shared expenses aside from their accounts for their savings and expenditures.
Having equal access to the account, they must deposit money to the joint account and agree to whatever amount to be withdrawn for a specific reason.
Another way to do this is to transfer to a shared chequing account from your accounts and agree on how you will take care of expenses such as groceries, rent or mortgage, and childcare.
Irrespective of how you go about with your spouse, you both must come to a specified amount for shared expenses.
Have Long Term Investments And Savings Plans
It is vital to have long-term investments and savings plans. It is never too early to start saving for the future.
Different plans enable newcomers to make long-term investments and savings.
Some of these plans include:
- Registered Retirement Savings Plan (RRSP)
It is a plan that can help you pay more for your retirement savings. In addition, RRSP contributions are tax-deductible, which can help you reduce the amount of tax you pay.
- Tax-Free Savings Account (TFSA)
It is a plan that can help you save your money and invest it tax-free. Each year, you can donate savings to your TFSA. These deposits are not deducted for income tax purposes until a specific limit. You do not have to pay tax on your TFSA.
- Registered Education Savings Plan (RESP)
It is a program that can help you save for your children’s education, and donations from the government fund your contributions.