How Do I start Saving?

How do I start saving my money?… I get asked this question a lot from young Canadians. Saving money can be very hard for some people who have accumulated debt such as student loans, car loans, credit cards, and other consumer debt. The average Post-Secondary school graduate will end up graduating with roughly $30,000 to $40,000 worth of debt.
From my experience most recent grads are excited about entering the real world, the stress of school is gone and it’s time to start making some real money, the only unfortunate thing is for recent grads is the pressures to find a job in the field that they have studied for the past 4 years.

Most recent grads are resulting too find part-time or full-time jobs outside of their field of study until job openings appear in the industry where they intend to begin their career. The average post secondary school graduate will make anywhere from $24,000 to $35,000 their first year in the work force, as mentioned above most of the money that you make will go towards paying off any outstanding loans, lines of credit, or credit card debt.

Now we go back to the original question….How do I start saving my money?

One of the most important parts of your budget is saving for your future. It doesn't matter how much, the important thing is to get started, even a few dollars saved each month can add up over time.

The standard guidelines to saving is to save at least 10% of your pay.
Example: If you make $2,000 per month you should try and save $200 per month
If your income changes each month, adjust your savings accordingly
Build Savings into your monthly budget, it can help you stick to your plan.
Each year challenge yourself to reach a higher savings goal
Save more if your pay goes up or you get a bonus at work
If you have a lot of debt try saving a smaller amount until you’re debt-free.

Where can we start saving?

Most Canadians have a  standard checking and savings account, the checking account is where we put our paychecks and any other earned income aside, our savings account is typically where we put our money aside and expect it to grow which we can use for a rainy day or emergency. When we put money into our savings account we expect that money to grow, but little do we realize the banks are only giving us 0.25% on every dollar that we have inside out savings account. Not the typical return most Canadians are looking for.

My Suggestions

Open a TFSA (Tax Free Savings Account) where you can choose a high interest savings account that is earning you 1.35% to 2.00% interest on every dollar OR choose a fund that will invest you’re your money into markets/industries specific to your risk tolerance with a higher growth potential then a high interest savings account.

Start a PAC agreement (Pre-authorized check) which allows the financial company to transfer a specified lump sum of money of your choice each week into your TFSA from your checking account, this way your money is working for you and each week you wont have to worry about setting aside money because it is automatically set aside through the PAC agreement. Setting aside at least $20 per week with accrued interest can help you become financially stable even if debts are still outstanding.

Finally, When RRSP season comes around typically from January until Midnight March 1st, if there is any unused income inside your TFSA, open an RSP (Registered Savings Plan) which will allow you to save for your retirement and put any unused capital from your TFSA into the RSP tax free. While you can contribute to your RRSP at any time during the year, many Canadians wait until January and February to take advantage of this tax break.

In closing, don't forget: saving is something you do for your future. How much you save depends on your situation. It's a question of finding the right balance for you.

How will getting married change the way we handle money?

The biggest concerns for many life partners have to do with money. Who will spend what? How will you share the bills? How much will you save? You should discuss these questions even before you say 'I do' or move in together.

Four big money questions for couples

1. Will we combine our finances? If so, how? Some couples share everything. They have one joint account and share all the bills. Others share a few things or keep everything apart.

Example: Morris and Sam each have their own bank account. Plus, they each contribute $1,000 each month to a joint account to pay bills or save for shared goals.

2. How will we spend our money? Now is the time to set up a budget with clear spending limits. For example, agree on how much you each can spend without checking with the other, such as $100 or $200. For bigger purchases, you'll talk about it first.

If you keep your money separate, make sure you plan who will pay which bills. Also discuss how you will handle your debts, including credit cards and student loans. Sometimes, one partner has more debt than the other. Sometimes, there are children from a previous marriage to raise. How will you share those costs?

3. How much will we save? The experts say you should always pay yourself first, even if it's just $10 each week from each pay cheque. Some day, you'll be able to use this money for big purchases like buying a car or a new home.

4. How will we take care of each other if life changes? Discuss what will happen to your money if one or both of you gets sick or dies. If you don't have insurance at work, you may want to buy life insurance and disability insurance. If only one of you is working, it's even more important.

Also, as soon as you marry, any will you made before is no longer valid. If you have children from a previous marriage, you'll want to make sure you have a good plan for their future as well.

Remember: There's more than one way to handle money as a couple

You need to find what works for you and your life partner. Sometimes one person is more of a saver while the other person may be more of a spender. Make sure you talk about those differences. Then, work out a common approach you can both accept. If you find it hard to agree, a visit to a financial adviser may help.

Life Insurance replaces Mortgage Insurance?

Home is not only where the heart is, it's also the largest single debt for most Canadians. But that's OK, because your home is the centre of your family's life. That's why you should consider mortgage insurance.

Traditional mortgage insurance can be obtained from your lender as part of your overall mortgage package. The premium is added to your monthly mortgage payment.

• The policy has no cash value and the benefits are paid directly to the lender.

• Your lender owns the policy. If you decide to change your lending institution to get a better mortgage rate or move to a new home, you have to re-qualify medically for new protection, potentially at higher premiums.

• Your coverage ends when the mortgage is paid off.
  
  
• Although it is unlikely, the fact remains that the insurance company that underwrites the policy could change the rate structure or cancel coverage as a whole.
  

Personal life insurance is all yours. You own the policy and it insures you, not the mortgage. You decide on the type of policy that's best for you -- either term or permanent insurance -- and you choose the beneficiaries who can use the funds to pay off the mortgage, provide an income or cover immediate expenses.

• Your coverage isn't reduced by a declining mortgage balance, so your beneficiaries stay protected. Any benefit payout in excess of the amount owing on the mortgage is available for use by your beneficiary.
  
  
• If you choose term insurance, you can convert it to permanent insurance at a time suitable to you.
  
  
• Your coverage goes everywhere with you -- from home to home, mortgage to mortgage -- and you can reduce the amount of coverage any time you want.
  
  
• It's your plan, with the options, features and premiums that fit your needs and budget. And you can add disability and critical illness insurance that can include the benefit of waiving your premiums should you become disabled, providing the money to continue making mortgage payments or paying your medical expenses.

Your home is your family's protective nest. It makes sense to protect it (and your family) with the right type of mortgage insurance. As a professional adviser I help you get the right protection that blends with your overall financial life.