How To Manage My Finances In Canada? [Money Management Tips]

‘How to manage my finances’ is a common question that many who move to Canada ask themselves. Needless to say, having many credit cards, no financial goals, and somehow not being able to pay your bills on time is a recipe for financial failure, not financial stability. When it comes to managing your financial accounts the right way, utilizing the high-interest rates that your ban may offer and limiting your monthly spending is the way to go.

Managing your finances does not require a magical formula. Being reasonable with your spending habits, avoiding high-risk tolerance, and using financial institutions to your advantage are the keys to success. Paying more than the minimum payments on your loans and credit cards is the next best thing to do to reach financial stability and independence and being able to track and improve your credit history is the advanced level of financial literacy skills.

As so many immigrants to Canada are taken aback by the prices and how many services there are to pay to enjoy life in a developed country, it goes without saying that a good guide on managing your finances is a good piece of read. This is what we will be dealing with today. That being said, let’s get right to it.

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Ways To Manage Your Day-To-Day Finances

Money management in Canada is no different than money management in any other country. The only difference between the two could be that in Canada you have more tools that you can use for personal money management and growth. Credit spending and overusing credit card providers is frowned upon by many money managers, which could be the same in your country of origin too. But, being smart about how you spend your money and how you invest whatever is left over is the way to go. With this in mind, we will be covering the following 19 ways to save money in Canada:

Opening the right kind of bank accounts and learning financial planning
Understanding your current financial situation
Make a financial strategy that works for you and work on debt management, reducing amounts of debt
Setting realistic financial objectives and achievable money goals without hiring personal finance professionals
Being aware of where your money is going and how your finances are doing
Being mindful of the way you spend your money
Understanding your income and what you can do to improve it, including extra money from a side hustle
Understanding how debt works and how to pay it off the fastest, including money management tools
Understanding your credit score and how to improve it, without overspending on a budgeting app
Creating an emergency fund as a part of basic money management skills
Preparing for unforeseen expenditures is an essential money management skill
Comparing prices for large purchases
Investing in a good retirement fund as an investment is among the essentials of money management activities
Investing for beginners and building a good relationship with money
Comparing insurance plans beyond what personal finance bloggers may suggest
Finding the reasons to start investing, as these are good personal finance habits
Advanced money management tips and personal finance management
Getting your spouse on the same train
Backing up your financial plans

Create the Appropriate Bank Accounts

How to manage your finances and how to manage home finances are the same issue. Once you know one, you know the other one as well. However, once you know how to manage day-to-day finances, you will not immediately know how to manage your finances in the long run. You will need a completely different approach to be able to handle your finances in the long run, and your best friend here are bank account.

However, it is clear that even the top bank accounts do not yield interest rates that are nearly as good as they should be to provide you with a solid income, and keeping your entire wages there is likely to reduce the value of your money. For this reason, you will need to be careful with the bank accounts that you use. You will need a check and a savings account.

Your checking account is the account that you can use for your everyday purchases. Having some balance on it at all times will prevent you from overspending and ‘going into the red’. At the same time, using your debit card and connecting it to the checking account is the next best thing, as the credit card interest rates are way higher than they should be. Not only that, but banks are known for using different strategies to make you spend more, and doing so can heavily compromise your bank balance at the end of the month. Only use credit cards to build your credit score and always make sure to pay off the outstanding balance at the end of the month.

Once your credit rating is slowly growing, you will need to consider getting a savings account. They are not very popular, as the interest yield on them is very low, often under 1%, but they can be a very powerful tool for day-to-day money decisions and effective money management. You should visit your bank, and see what you can do to automate your savings. Here are some ideas:

Automate moving 10-20% of your wages to a savings account
Use a round-up savings system – the idea is that all your purchases are rounded up and the difference is sent to the savings account. Did you just pay CAD5.49 for that latte? CAD6 is charged to your account – 5.49 for the latte and 0.51 is sent to your savings account. A CAD230 payment can be rounded up to CAD250, and the difference of CAD20 is sent to your savings
Automate moving smaller amounts of money to your savings account in regular intervals – CAD50 a week is not too much, but it will add up to CAD2,600 a year
Before getting your paycheck, check your existing balance in your checking account – and move that amount to the savings account as soon as you get your wage deposited

The money from your savings account can then be sent elsewhere for investment or larger purchases – but only if they will help you save in the long run.

Analyze Your Present Financial Condition

Not having the right money management plan can cost you a lot of money in the long run. Living paycheck to paycheck is the most expensive lifestyle, whatever your spending may be. You should carefully consider your current financial condition. Take the following into consideration:

Your total earned income – your wages
Your income from rental properties
Your income from interest rates
Your income from your investments
Any other form of income that you may receive
Your total expenditure
Your loans
Your credit
Your day-to-day expenditure
The money you spend going out
The money allocated to your bills, utilities, phone, cable, Internet, vacations, gift shopping, subscription services, clothes, toiletries and cosmetics, makeup, appointments, etc.
The money you spend on insurance, life insurance, healthcare, dental, etc.

To understand your financial situation to the last bit, we recommend you use Kakeibo – a Japanese money management strategy that inspires with its simplicity. With this, you do not need a money management app, just a single notepad that you record ALL your daily expenses into – down to the last Starbucks. Monthly and annually, add up all the expenses and divide them by categories – eating out, utilities, groceries, coffee, etc. are just some ideas on the categories you can list here.

Make a Financial Strategy

If you know how to manage your money as a student, you will also know how to manage it as an adult. If you have no financial goals and strategies, it is difficult for you will be able to save anything. What are you saving for, anyway? However, if you have a clear financial strategy, it is easy to see where your money will be going and you will be able to save more – as, now, your money has a purpose.

To do so, set some financial goals. See where you are in life and how you can improve your lifestyle without overpaying. For example, you may want a new car, but a new Tesla will help you cut down on your expenses. Having less money spent on fuel will help you reach your other financial goals much faster, and the effect is cumulative. When it comes to making the right choices, this can be very easy: if new insulation for your home can save 25% on your energy bills year after year, why would you put your money into the stock market where you can make around 10% a year?

However, insulating your home will help you save more every year and will help you invest more in the stock market. This way, you will be able to achieve more in less time, and you will be left with property of a higher worth than before the insulation. The same goes for even the smallest of tweaks around your home: although it may seem counterintuitive, you should spend money to save money, just be smart about how you spend it.

Set Realistic Financial Objectives

Setting financial objectives that are unrealistic is not a good way to be frugal with your money. Saving 50% of your income year after year is not impossible, but it will leave you strained and wanting to live (and spend) even the money you do not have. An important aspect of money management is knowing how to set realistic goals and objectives with your money.

For example, reducing your utility costs by 10% by the end of the year is easy to achieve: simply purchase a Google Nest. Putting aside 10% of your income is another one. Cutting back on subscription services and reducing costs by 30% is another example of a realistic goal. All combined, you can save thousands a year this way. Set milestones and reward yourself whenever you reach one or more of them. When it comes to reaching those 50% savings rates, this is much easier done incrementally than all at once.

Maintain Daily Contact With Your Finances

Daily contact with your finances is also important. This way, you will be able to track your progress towards your goals. This does not mean that you should keep complex spreadsheets on your coffee table, quite on the contrary, being aware of the money coming in and going out is going to be the best way to do so. This is where Kakeibo can help you. This will help you build good money management skills as you will be able to track your progress, quite literally, daily.

Another way to approach this is to use your credit card balances to check in on your progress. You can set yourself a daily limit: all the money that is spent over the limit is ‘borrowed’ from other days, and all the leftover money is sent to other days. This money management method will teach you both to save and reward yourself, although it may take a bit of time and discipline to get used to.

Reduce Your Spending

Another important one among your money skills is being able to reduce your spending without living as a hermit. When it comes to this, you should first do what is known allocation of funds. Do you remember our Kakeibo money management system? Look at the categories you have there: utilities, entertainment, eating out. Compare your current expenditure to your financial goals, and see how giving up on a single thing can help you reach your financial goals much faster.

Skipping a single meal out will easily save you CAD30. This is not much, but if you eat out 4 times a week and give up on a single meal, you could easily save CAD1,530 a year. This will not make you rich but will help switch all the lightbulbs in your home, install water-efficient taps, purchase a Google Nest, and more – helping you save upwards of CAD2,000 on utilities alone, and every year. Now you are saving CAD3,500 every year. This is a nice vacation, or being able to retire a year or two earlier than planned. Many things we enjoy cost little, simply because we subscribe to them, but consider how much you could save by giving up on just a few of these every year:

Service/Product	Monthly Savings	Yearly Savings
Netflix	6.99	83.88
Spotify	14.99	179.88
Disney Plus	11.99	143.88
HBO	21.74	260.88
YouTube Premium	11.99	143.88
Cable	52	624
One Meal Out a Week	120	1440
Smoking a Pack a Day	390	4680
One Starbucks a Workday @CAD10	220	2640
One Visit to the Cinema a Week	11.99	143.88
One Garment a Week @CAD15	60	720
One Night Out With Friends a Month Less	50	600
Saving 10% on fuel (one trip less biweekly)	25	300
TOTAL	756.99	11960.28

Pay attention that these are just A FEW of the services and subscriptions that an average Canadian has. You may have even more, but it is important to note that you do not have to give up on all of these to reach your goals – going out with your friends just one night a month less and having one meal out a week less is almost CAD2,000 in savings every year – this is enough for most utilities. Putting expenses in the right perspective is as important as it gets.

Consider Your Income

Of course, there is only so much that you can save, even on the biggest expenses in your day-to-day expenses. Fuel, food, going out, and debt payments generally take up most of the money in your household, so being able to cut back on these is going to help you save a lot. But again, there is only so much that you can save, so while looking at your expenses makes some sense, looking at your income can help you reach your financial goals much faster.

To increase your income, you can:

apply for overtime at your workplace
pick up a side hustle, such as Uber, or Uber Eats, turning your hobby into a money-making opportunity, even mowing grass at your neighbour’s can bring in 50-100 dollars every weekend
sell your old stuff – Facebook marketplace, Craigslist, and many more services exist where you can make a few hundred bucks for your old stuff
organize a yard sale – a single day can bring in extra income – sell your old books, clothes, school books, school supplies, old tires, THAT old lawnmower you haven’t used since you’ve purchased a new one, Christmas decorations, old paintings and decorations, old electronics, that old coin collection you haven’t added anything to since Grade 3, and much more
pick up some work on Upwork, Freelancer, Fiverr, etc. Here, you can sell your talent or knowledge and turn 4 hours a week into CAD100-200. This is easily done and will not interfere with your day-to-day life too much. Time allocation is important: would you rather lay on your back or actively work to secure your future?

Make a Strategy for Debt Repayment

Your living expenses can get much lower if you simply consider all the debt you have. When it comes to this, you should consider all the debt you have: your car payments, mortgage payments, payments on all your credit cards, and similar expenses that are recurring and accrue interest if not paid in time. Take a single sheet of paper and write them all down – you should include the details on how much outstanding balance you have for each of these, what the monthly payments are, and most importantly, the interest rate.

Then, make a plan on how to pay them off. You should prioritize those with the highest interest rate first. Make additional payments towards it and get rid of this debt as soon as possible. Then, revise the list, and focus on the next debt item with the highest interest rate. Inflation over time will eat away at the debt, this is somewhat true, but you should be able to understand that it is much better to have inflation work against the interest you earn than the interest you pay.

But how to make additional payments if you are still living paycheck-to-paycheck? If you’ve followed our tips so far and managed to save as little as CAD100 a month, this is still CAD1,200 a year that you can dedicate to your debts. Do not hesitate to postpone investments, because a 30% interest rate on your credit card should be prioritized over 5-10% interest from your investments (if you are lucky enough to get this much). Breakdown by expense category is going to be your biggest friend here, and Kakeibo categorization will help you to save way more than CAD100 a month.

Study Your Credit Score

When it comes to your credit score, this is a big deal when it comes to the expense fees you have to pay and the interest rate you give to your bank. Fluctuations in income (where your monthly income gets lower, for whatever reason) can negatively impact your credit score, so being mindful of it will help you in the long run.

The bulk income that you make should go towards paying off any debt and saving a bit of money aside to make regular payments for your utilities and debt that you may have even during the rainy days. Whenever you get a chance, use your credit card and make sure you pay it back at the earliest possible notice. When it comes to this, you should understand that controlled debt, where no bulk of income goes towards paying it off, is a good thing for your credit score, for as long as you can pay it back. Personal finance education courses have a ton of materials on how to improve your credit score, so do not hesitate to use them.

Create an Emergency Fund

An emergency fund should also be on your list of finance prioritization. If you’ve followed all our steps so far, you should have been able to save some money every month. Use this money to build up an emergency fund. This fund should have enough money for you to live off of in the case of a job loss and should cover ALL your expenses. There is no point in going frugal and saving once the job is gone – as there is nothing to save from.

On the other hand, when it comes to insurance products, the best insurance is the emergency fund. This will give you peace of mind of knowing that your finance purchases and emergencies are covered and will give you enough time and resources to deal with real-life scenarios that we witness every day. The emergency fund should last for about six months ideally, with three months being the bare minimum and a year being a bit over the top. This money should be easily accessible.

Prepare for Significant Expenditures

Occasionally, you will have to pay larger expenses. These may include fixing the roof, fixing the damage to the property, or simple insurance payments that you may have to pay once a year. When it comes to these, it is always best to have the money ready well in advance. So, instead of paying CAD600 for an insurance policy out of a single paycheck, it is much better to save CAD50 a month and make the payment without too much hassle.

When it comes to saving this way, it is probably best to use the envelope system. Take a few envelopes (each for a single large expense), label what it is for, what the expense is in CAD, and how much you should put in every month or every week to meet the goal. As soon as the paycheck hits your bank account, take cash out, and put the corresponding amounts into envelopes. This way, you can save a lot and not feel it. Do not reach out for the money in case you have some other costs to cover – cover those from your regular paychecks.

Compare Prices For Large Purchases

When making larger purchases, it is important to compare the prices and the quotes you get and to see what you can do to secure the lowest price for the goods that you need. For example, purchasing a very expensive car may not be the wisest decision, but comparing different models and their prices can help you find a car with the same performance for a lower price.

When you need to fix up your home, compare several quotes and see which one works the best. Beware that lower prices may mean a shady service, but make sure you do your best to find the balance between the two. The same goes for bulk food shopping, or asking for a discount with your Internet provider if you pay a full year in advance.

Put Money Toward Your Retirement

Your investment portfolio is probably not where you would like it to be, but being thrifty with your money will easily free up some extra cash that you can put towards your retirement fund. As you do not need as much money as you may think, it is wise to make good financial decisions and secure an early investment. Always bear in mind that time in the market beats timing the market.

Commence Investing

This is probably a big thing, but the investment time horizon is always closer than it may seem. Any disposable income that you have should go towards investments of any kind, be it the stock market, individual life insurance plan (with a higher, rather than lower) life insurance premium, or towards securing more cash flow (rental incomes or even investing in agricultural funds).

Comparison Shop for Insurance

Home insurance, life insurance, car insurance, health insurance, renters insurance, disability insurance, and much more are all that you may have to pay in an average month. Being aware that this is a big investment can be important, especially as you should be able to put some time aside every year to revise these policies and see what you can get for your money’s worth. Sometimes, choosing insurance plans with longer insured periods can help you save, so make sure to explore all the options offered in your area and do what you can to spend less on a necessity like this one.

Find Out Your Reason for Investing

All we’ve said so far is great, but saving and investing takes a lot of effort on your side. It can be difficult to stay motivated, especially if you need to save in the long run. For this reason, you will need to find a reason to save. For some, retiring at the age of 50 may work the best, while for others a fancy cruise once a year may be the best motivator. Find your reason for saving and start today.

Become Knowledgeable About Improved Money Management

There are major benefits to saving money and earning cash rewards, purchasing in bulk, and keeping your expenses in cash. It is important to understand that this is nothing too complicated, but that staying informed is an important thing to consider. Your debt reduction goals and individual goals with saving and planning for retirement are nothing new: somebody has had these goals before and somebody has invested considerable time and effort to resolve their issues. When it comes to these, there are countless online resources that you can use to stay educated on the topic and to help you reach your long-term investment goals.

Find a Responsible Companion

Having someone by your side on your financial literacy path is a great way to stay motivated. Ideally, your like-minded spouse can help you the most, but you can reach maximum benefit if you are both equally as motivated and check in with each other periodically, let’s say once a week. This does not have to be a spouse – a close friend can help you just as much, and maybe even more.

Back-Up All Your Financial Plans

Whatever your exact plans may be, you will need to find the best way to back up your plans. While some may use their buddies or spouses to help them follow through on their plans, others may consider simply writing them down on the list, making an Excel spreadsheet, or even sharing them with their friends.

How To Improve Money Management Plan?

The above advice is an idea, based on many years of experience and many testimonials. If you feel that you have your ideas, feel free to implement them. Some may add chasing deals in supermarkets or coupon shopping. Whatever works for you works for us as well, for as long as you do not have too much cash idling (inflation is a killer) and for as long as your premium payment and individual retirement payments are made in time.

However, these are concrete examples, and you will need to work on your money management skills and your plan, which should be revised every year or so. When it comes to budgeting for dummies, what budgeting method works the best for you depends on your lifestyle, habits, and what you are comfortable with when it comes to money management. When it comes to real people, there are many methods people have up with, not economists.

To make sure you build the right money management skills, you should seek online resources, as well as sources of information around yourself. Ask your parents or grandparents what money-saving tips helped them overcome some money issues in the past, and what advice they have to share with you. You will be surprised by dozens of cheap recipes and advice on how to invest in both foreign stocks and domestic savings plans that will come your way.

Once you start working on your skills, you will notice that you will also start revising your savings plan according to your new knowledge and changing financial needs. This is what a perfect financial plan should look like – it should not be fixed, but rather informed. It should not be rigid, but rather responsive to the changes in the financial market. So, while you may spend your first year cutting back on unnecessary subscriptions and optimizing your home and meal plan for maximum savings, you may spend the second year looking for the best insurance, Internet, and electricity plans, and ways to save on food and clothes even more. And this is fine. The next few years can be spent on paying off your debt, and only then you may have enough to invest in retirement savings. And this is fine, for as long as you can handle market risk, changes in your income, and control your expenses and shopping habits.

How To Create a Budget Plan?

Creating a budget is simple, and many make a big deal out of it. Think of a budget as two lists – one lists all your income, and the other all your expenses. The income should be totaled – to see how much income you bring into your home every month. The expenses should be totaled as well – to see how much you spend.

Then, use principles similar to the Kakeibo that we have described above to categorize these expenses and see where you can cut back to increase the difference between the two. The difference between income and expenses is the money you can save every month. A good financial portfolio will list all the current items and should take into account all the plans that you may have.

Student financial services have a ton of resources online on how to do this, and how much money you should be putting aside. When it comes to students, they still do not have to pay off their student loans and mortgage – but you may have to. So, bear in mind that you can easily adjust their existing plans to fit your needs, but you can still consult them for ideas.

A budget plan can also include all the investments that you would like to make. Having varied investment risk can only be achieved with a diversified portfolio, individual stocks, funds, and liquid assets. These are important to invest in, but you should understand that high-risk investments (with potentially higher yields) are acceptable only if you are under 30 years of age. At the same time, be careful how you allocate your contributions to investment accounts – this is a part of your budget after all.

Check Out How to Manage Your Finances as a Newcomer to Canada:

How Much Should I Set Aside per Month?

Your budget spreadsheet should not only have information on income and expenses. How much you should be putting aside and where should also be in an ideal budget? Personal capital should be maintained, so make sure to never forget that you will need a place of your own and that financial tools can help you get there. One thing commonly seen as acceptable that we do not advise is financial aggregation tools, as the interest rates coming from loans that you are refinancing can be a big headache.

Instead, set aside a fixed amount every month and invest it somewhere where the money can grow. Your pension or retirement fund, stocks, and other forms of saving should all be supplied with your money. When doing so, it is best to start setting aside some 10% of your income in the first year or so of your career and increase it incrementally as you develop good monetary habits.

How Much Should I Put Aside for Emergencies?

In addition to this, you should also set some money aside for an emergency fund. An emergency fund should ideally have 6 months of expenses and this includes ALL expenses. Never forget that from time to time you may come across unexpected expenses, your car may break or you may even stay without a job. This is where the emergency fund comes in – if you have it, you will be able to cover your expenses until you find another job or fix your car without taking out a small loan.

FAQs

How Much Money Should I Have Saved by 45?

If you are 45, you will need to have 3x of your yearly salary put away in a retirement plan, investment fund, or with active fund managers. If you are still not here, you should be able to be there soon. Scroll back and look at our advice on how to save money to fast-track your progress.

What Are Examples of Monthly Expenses?

Anything you spend your money on is an expense. When we say ‘monthly expenses’ we usually mean recurring expenses, such as your car, mortgage or loan payment, your utilities, food, going out, and clothes. These expenses may not seem to be too big on their own, but you should be able to understand that they can add up – do you need 5 subscription services AND a cable package?

How to Manage Home Finances?

Managing your home finances is not that difficult. When it comes to taking control of your expenses, you should be aware of your income, expenses, and different ways to save. Negotiating interest rates, budgeting for different purposes, bulk buying, and staying away from Starbucks can all have a tremendous influence on your finances down the road.

How Can I Be Financially Smart?

As with any other kind of smart, being financially smart is all about small steps and choices. There are many online resources that you can use to save money and learn more about your finances. When it comes to these, you should be able to understand the ideas and concepts and then be able to implement them in your life and personal finances – knowledge is useless unless applied.

Final Thoughts

Moving to a different country can be quite expensive. Not only are you expected to provide for yourself and your family, but you are also expected to apply for and pay different social services, and healthcare insurance, find a home, and build a good credit report. When it comes to all of these, you will need to be very financially disciplined and have a level head – overspending in the first years of living in Canada can cost you dearly over the long run.