Managing finances is not an easy task. Life is uncertain and so are the prices for necessities and survival. If you are struggling to improve your finances in Canada, we can help you! If you are wondering how to improve your finances in Canada, we have created a comprehensive list of ways that you can follow to transform your financial outlook and condition.
You sure hope to turn your life around every new year and be the person whose finances are in accordance with needs. You must devise a roadmap to get out of the debts, and start the year on the right path, stick with your resolution, and make your life better.
However, not everyone follows through with their commitments and slowly falls back into the same pattern. Fret not! We have just the solution in the form of these 13 tips to reform your financial condition. You don’t have to implement everything at once, take baby steps, and then leap towards the end.
1. Financial Goals are a Must
What do you want to achieve with your finances this year? Is it a car? Get rid of debt? If so, how much do you need and when? Your goals need to be specific and measurable. For instance, paying off auto loan debt of $30,000 this year.
These goals can be divided into small attainable parts. Like monthly, weekly, or bi-weekly goals. You also have to divide them into short-term and long-term goals for more clarity. The real results depend on your determination and how optimized your process is. If a long-term goal includes lots of milestones along the way, you will have to break it down into small tasks and track your progress along the way.
In the example above, you decided to pay back your loan in December 2021. To fulfill this goal of getting off the $30,000 debt, you need to break the goals. Say, you can deposit $2,000 in payments every month.
Lump sum deposits = $2,000*12 = $24,000
Monthly loan repayments = $500/month*12 = $6,000
Total payment= $30,000
You might hit snags on the way to $2,000 monthly payments. However, you will always get back on track as long as you have the rope of a meticulously divided plan to pull you up. Therefore, you will be free of the massive debt by the end of the year.
A SMART Goal
Having a SMART goal is crucial. Let’s break down each letter to see what that means for your financial goals.
S- Specific: What is your goal? For example, you want to pay off $30,000 in debt by making a $2,000 monthly payment.
M: Measurable: How many dollars are you willing to put aside each month for your goal? For example: $2,000 lump-sum for 12 months.
A- Attainable: Is this goal not too realistic? You should ensure that your goals are in accordance with your means and your current conditions. To save money for your goals you can do carpooling, DIY your car maintenance, pay a low fee, quit smoking and drinking, etc.
To get some extra cash, you can deliver food, tutor online, use cash-back apps, take surveys, etc.
R- Relevant: Is your goal bringing any benefit for you? Is it important? For example, You want to pay off debt so the deposits can become your savings for the future.
T- Time-bound: How long will it take your goal to be complete? 1-2 years or more? Is it a long-term goal or a short-term goal? You have to decide your milestones and break down the goal into smaller and achievable parts.
2. Prepare a Budget
What is a budget? It is a mathematical confirmation of your suspicions as explained by A.A. Latimer.
To know how to improve your finances in Canada, a budget is a must as it tells you the direction in which your money is flowing. Creating a goal is great, but you also need to define a criterion that ensures that you have money left for necessities at the end of the month.
To create a working budget, you will have to assess your expenses and income meticulously and establish if you will have money at the end of the day. If you find that you don’t have money that will suffice your needs, you need to either change your goal or increase your income. For example, You can do a side hustle.
There are several free budgeting apps in Canada like Mint, KOHO, etc. Use them to create a comprehensive and effective plan.
3. Get Rid of Interest Leaden Debts
High-interest loans will feed on your money like a leech. Hence, they have got to go! An example of this debt is credit card debt.
You need to plan your finances in a way that your high-interest debts are expelled. This is because any outstanding balance on your credit card is an invitation to the bank to increase your debt by adding the interest to the amount.
You can get free of this trap by making extra monthly payments, and not just doing the minimum payments because that will make your debt stagnant.
If you have a credit card with a high limit, you should go for a low-interest balance transfer card like Value Visa Card or Scotiabank. In case you have a low-interest credit card, it will be more beneficial because you can save on interest and most of your monthly payment will go towards the principal amount of debt.
If you are stuck with a high student loan, you can go for low-interest finance which will help you save thousands of dollars in interest payments. In case your credit card balance has been tumbling down constantly due to bad financial decisions, you can start rebuilding your credit score in Canada by making regular payments and not taking unnecessary loans. You should stay away from payday loans because they incur up to 600% interest rate annually.
4. Increase Your Income
The best way to stay financially sound in Canada is to limit your expenses and find more ways to earn or you can also go for both options for some extra savings. This is one of the top ways on how to improve your finances in Canada.
The first option to increase your income is at your current job. This can be done by offering more services to your company or negotiating a pay raise for your effort. If that does not work, you can also join another company that might be on the lookout for someone with skills like you.
Following are some other ways to earn extra.
- Blog: You can start a blog and write about different topics under your expertise, and generate a profit of thousands of dollars from the comfort of your home.
- Proofreader: Proofreading services pay decently and all you have to do is have a good vocabulary, know the grammar rules, and be driven towards reading and writing.
- Drive: You can drive people to their destination in your free time in your car. You can also make deliveries for DoorDash or Instacard, etc.
- Pet sitter: You can watch after dogs and other pets and earn more than $1,000 per month.
- Renting: If you have a spare property or room, you can rent it to people via Airbnb. You also get $1 million liability coverage.
- Teach English: If you are a native English speaker, you can teach in overseas countries at a very good rate of $25-$30 per hour.
- Sell your talent: You can sell your services on platforms like Fiverr, Upwork, Freelancer, etc.
5. Leverage Cashback Apps
The market is brimming with free applications that give you the liberty to purchase and still make money out of it. You can get cashback as high as 30% of your purchase and hence earn something extra. Some of the good cashback applications that can help you to improve your finances in Canada are:
- Checkout 51
Some general online shopping applications are:
- Rakuten: You get a $5-$30 sign-up bonus.
- TopCashback: It has over 4,380 stores to get cashback from.
Additionally, you can refer it to a friend and earn cashback.
6. Put a Cap on Your Expenses
It is crucial that you stop being a spendthrift if you want to improve your finances in Canada. You can prepare your meals at home and avoid eating out a lot. This alone can save thousands of dollars for you. You have the option to try the $5 meal challenge where you prepare nutritious food from scratch.
You should cut on your energy and water bills by using them efficiently. Get rid of subscriptions that are of no use to you like streaming services, gym, tv, magazines, etc.
It is advisable to be cautious that you are not paying extra bank and investment fees. You can do this by opening a free online account in EQ Bank or Tangerine Bank. While investing, make due diligence and invest in options you understand and are as per your risk appetite. If you want to avoid penalties on bills, automate your bills as it lowers down your credit score too.
7. Savings on Automation
While making a savings plan is a piece of cake, it is the keeping up with the goals part that exhausts people. It is due to this flailing determination that many Canadians have less than $1,000 in their savings account.
Hence, to meet your savings goal, we advise you to create an automated savings plan. It means you don’t have to transfer money each month, instead, your money will automatically be transferred from your checking account to the savings account on a fixed period.
It is a good point for how to improve your finances in Canada as you can use automated savings applications like Moka or Wealthsimple, and Empower. These help to save the money that is excess, so you won’t compromise your lifestyle. You should at least put 10% of your income in the savings account to improve your habit of splurging.
8. Investment is the Key
A good investment portfolio can secure your future and give you the financial freedom that you have always desired. You should be investing monthly or daily if you are free of debts.
To achieve this, you have to contribute openly to the tax-free and tax-deferred accounts like TFSA, RRSP, IRA, and 401(K). You can invest in mutual funds or ETFs. As per the investment legend Warren Buffet, mostly the fund managers get great profits on the investment and not the client. Hence, large and small investors should stay with low-cost indexes.
An autonomous investor can further lower down their trading costs through commission-free ETFs and discount brokers like Wealthsimple Trade which also provides a $50 bonus. You can take the help of a Robo-advisor to automate your investments and free up time while maximizing the gains. In Canada, you can get the service of Wealthsimple Robo-advisor.
9. Create a Good Credit Score
To improve your finances in Canada, you have to reform your credit score and create good rapport in the financial realm. To assess the same you can use Borrowell that helps you in averting the risk of frauds, scams, thefts, and errors that may bring down your credit score.
If you have a good credit score, you will be eligible for a competitive interest rate that will help save your money. If you use Borrowell, you get free credit report access and monitor your score every time that you make a financial move.
10. Do It Yourself (DIY)
The internet is brimming with examples of how you can do everything by yourself. There are websites, YouTube videos on saving money, creating your own business, etc. Here are our top picks of DIY things that can help you manage your finances.
- You can DIY your car maintenance and repair.
- Cook your meals.
- Do your own haircut.
- Weatherstrip home.
- Regulate your AC or furnace.
- Paint the room.
- Weed your garden.
- Restore the old deck.
- Replace your own light switch.
- Plant your vegetable garden.
11. Increase Your Knowledge
You can earn more by learning new skills while reading and learning. Investment in self is the greatest use of money. Education will help you to enhance your skills, increase your knowledge, solve real-life problems, broaden your thinking and understanding, and hence make more money.
Here are some of our top picks for reading about budgets, debt management, finances, etc.
- The total money makeover by Dave Ramsey.
- I will teach you how to be rich by Ramit Sethi.
- The richest man in Babylon by George Clason.
- The automatic millionaire by David Bach.
- The little book of common sense investing by John Badge.
12. Practice the Art of Decluttering
Getting rid of miscellaneous things in your home is another step towards managing finances and making the room more fresh and breathable, all while filling your wallet.
To do this you can sell the quirky finds on online marketplaces like eBay, Craigslist, Marketplaces, Amazon, Kijiji. Avoid impulsive buying and be prudent about each purchase. You should get rid of one item for every purchase that you make. Here are some more virtual decluttering suggestions.
- Consolidate your investment and banking accounts and avoid the confusion between millions of applications on your device.
- Cut off toxic people, and say ‘No’ to things and relationships that don’t help you grow. Be free from mental, physical, and financial exhaustion.
13. Live for Yourself
Your motive should be to live for yourself and not others. However, it is human nature to seek validation and praise from others. But if you want to know how to improve your finances in Canada, you will have to walk your path and ditch the desire to show off.
To achieve this, you should only buy what you need and not what others are doing to impress them. The reason why people push themselves into debt is they don’t make purchases on need but buy them on a whim to impress or fit in the crowd. Hence, this is the time to impress yourself by achieving your goals and acquiring financial freedom.
These 13 tips on how to improve your finances in Canada will reform your spending habits and transform you into a new person. The living will be more joyful and you won’t need to take out more loans or fall into debt traps. This is the year that you decide to work on yourself and bring out the version that is more goal-oriented and believes in having a sound financial stance. To conclude, if you want to improve your finances in Canada, you have to follow these tips religiously.