Honestly, all the reading I’ve done on numerous blogs and websites in order to get my finances to a healthy state has been quite overwhelming. RRSPs, TFSAs, stocks, bonds, DRIPs, WTF?? (The last abbreviation is not a means of savings/investing as far as I know. It has more to do with my frustration!) In this post, I will outline the first few steps I have taken on what I hope will be my road to recovery.
1. Creating a budget:
I know it sounds silly….and obvious, but just keeping track of where you spend your money can make a lot of difference. This is what my monthly budget looks like at the moment. I am not paying rent and associated bills this month since I am living in employer-provided accomodation until the end of the month. I have started asking for all my receipts and updating the Excel spreadsheet below as and when I make a purchase. As I get into the habit of doing this, I will probably be able to make all the updates once a week or so.
As expected, I’m going to need the most amount of discipline in the ‘Entertainment’ category. If I stick to this budget, I will be able to have $1300 at my disposal for savings, investments and an emergency fund at the end of the month. I am yet to nail down exactly how I will split up that $1300.
|MONTHLY FINANCES 2012|
|Mortgage/Rent||$1,100||$0||$1,100||No rent. In company condo.|
|Electricity||$55||$0||$55||Company pays bill.|
|Cable/Internet||$45||$0||$45||Company pays bill.|
2. Opening a Tax Free Savings Account:
I have a pretty good RRSP (Registered Retirement Savings Plan) and Employee Stock Purchase Plan through my employer due to which I have a decent amount of money in my RRSP at this stage. I have yet to figure out if a TFSA or an RRSP is the best way to go for someone in my specific situation (and tax bracket), but I chose to open a Tax Free Savings Account, specifically a Questrade Tax Free Trading Account last week. Registration was extremely simple and they are easily the cheapest online discount broker in Canada. I plan to use this account as a supplementary retirement account. Having a TFSA in addition to my RRSP will give me more flexibility in withdrawing funds during my retirement.
I have been doing some research into stocks this week, and will be taking the plunge into the market next week!
A much more experienced blogger than myself, youngandthrifty, has posted a great article on the pros and cons of RRSPs and TFSAs here.
3. Take Advantage of Banking Outside Canada:
I am an immigrant, here on a work permit. I will be applying for permanent residence soon. However, I do not plan on getting Canadian citizenship. My country offers quite a few financial vehicles that benefit non-residents. One of these options is a ‘non-resident’ account, in which I can deposit an unlimited amount of money. The money must be deposited from a foreign account – my PC Financial Chequing account will do just fine as a source. The funds are converted into the local currency upon arrival, and are repatriable whenever you want for free. Of course, you lose out a little on the currency conversion, but with the strength of the Loonie the exchange rate is strongly in my favour at the moment. Finally, the best part of this account is the interest rate it offers. On a short term (1-2 years) account, it currently offers a 9.5% interest rate! Furthermore, any interest you accrue is tax-exempt! If you don’t want to lock in your money even for a year, the interest rate is still a respectable 4%.
I will be sending a lump sum into this account every quarter (to cut down on EFT fees) from now on. This money should serve the purpose of providing me with money during my visit home, which will probably be once every couple of years.
This is the plan I’ve drawn out so far. Very rudimentary, I know, but it’s better than my previous plan, which involved basically living pay cheque to pay cheque.