Budget Planning for Your Daily Life
Financial literacy is a valuable tool for your success in today's economy.
Does your financial goal involve a daily cup of coffee with a new sweater once a week or future home ownership with retirement savings? Is it both? Regardless, it’s helpful to think about how much you need to earn, and save, to achieve your lifestyle and savings goals.
The Financial Consumer Agency of Canada (FCAC) and the Bank of Canada are here to help. FCAC brings us budget planning strategies so good that you may want to start implementing them at once in your monthly planning. The online budget planner looks at your life, lifestyle, income, and goals to show how your current strategy compares to other Canadians. The segments include current income, demographics, and financial goals.
Take time to analyze the strengths of your financial position
Observing your income concerning your lifestyle goals may seem simple. However, with a little effort, the results can be life-transforming.
First, let's look at money. What is it in actuality? The Bank of Canada defines money as a social agreement used as a medium of exchange for goods. It's also a store of value easier to save than a yard full of cows and a unit of account that makes comparison shopping a breeze. In other words, money is a currency that makes buying products, saving, and comparing goods practical in our modern societies.
How we spend and save money depends significantly on who we are and our life goals.
How your demographic information affects the way you think about money
Your Life Situation is your marital and family status. Are you a single person arriving for a new career with mingling and marriage goals, or a middle-aged family just settling in to make Canada your home? When you are single or coupled, you may have life goals that may differ from a family with three children on their way to university. Look at your life situation for ways it supports your long-term financial goals.
Young people without family obligations may have more incentives to take risks and plan a long game that includes higher-risk investments with recovery time.
A young family needs to feel more secure. These are your working years, and your goal may be to maximize their advantage. For example, you may want to open a mortgage to ensure shelter to your growing family or save in funds you have access to in case of an emergency and shorter-term goals.
As you age, education funds are behind you as your children grow and become more independent, and retirement is at the forefront. You may choose lower-risk investments or an RRSP fund.
Finally, in retirement, incoming revenue is a challenge once your working years are over—your pension from work and the Canadian Government complements your retirement savings and lifetime.
Earnings factors to consider
Your age: Age is a significant factor in earning retirement savings and planning your career goals. Investing more money in education in your early years may pay dividends in the future. Saving money to buy a home may offer a valuable rental source for your younger and older years.
Your Work: Your work and career are what you do for a living. Are you working part-time or full-time? Do you run your own business? Maybe, there is a way to work more or earn more money for what you do. You'll spend about a third of your day during working years at work, and it's up to you to choose a career path that will lead to happiness and financial health. When achieving success, a solid strategy, and a robust study ethic, it's okay to have patience with yourself. Those extra courses or Canadian experience of a volunteer position can pay big dividends in the future.
Your Home: Are you renting, or have you already bought a home? Can you turn your situation into a long-term saving advantage?
Your Primary Budgeting Goal: Is your primary goal to stay on track with what you've already set up, reduce your debt, save more money towards the purchase of a new home, or reduce your expenses to reign in your spending? Look at what makes you happy and will lead you to success in the future. Savings Goals Points You May Need
According to Statistics Canada, Canadians and their children are getting better at saving for education. A decade ago, in 2013, 77.1% of children under 17 had a Registered Education Savings Plan, and the average value was only $10,155. By 2020, that number had improved 7% to 84%, with an average value of $14,520 saved towards post-secondary school. As a result, our children are more likely to have savings to attend college or university when they graduate high school. In Canada, the price of tuition is considered reasonable by many. According to Statistics Canada, the average student in Canada can expect to pay between $25,875 and $63,323 for their degree in 2020.
Across the country, the price of buying a home fluctuates significantly. For example, a new home will cost an average of 85,000 in New Brunswick or $113,000 in Nova Scotia, where jobs may be scarce. On the other side of Canada, in British Columbia, new homes are more expensive, $673,000.
Canadians pay 15% to 26% in income tax each year. The money goes to programs like national defense, infrastructure projects and benefits like healthcare and old-age pension.
Research from the Bank of Canada states that our generation doesn’t have it easy. To retire in financial security, there may only be three options: more work, greater productivity, and higher savings. We'll need to invest more to increase capital or boost productivity. If you’re wondering how much you need to save, experts recommend putting aside or investing 5 – 15% of your paycheck for retirement.
Situations you may encounter
An emergency fund protects you from the unexpected costs of living in a busy world. We all encounter saving roadblocks like increases in condominium fees, broken pipes or buckling tiles in your home or more challenging financial setbacks like losing your job, the death and funeral of a loved one, your dog needing emergency veterinary services, school tuition and fees for your kids, and tax increases.
Now that you know various elements are involved in financial planning, check in on your financial health and plan a budget with the Start Your Budget Planner from the Canadian Government. So, before you reach for your next latte, set a date to plan your budget and your happiest, most secure future.
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