What are the most important personal finance topics?

1. Pay yourself first

• To ensure you have money to maintain your lifestyle in the future, it’s critical to save some for later.

• Start today with whatever amount you can. It will add up faster than you may expect.

• Raise the amount gradually, with a target of 10 to 20% of your income.

  Learn more about the importance and steps of getting to your money first.

2. Set goals for your money

• You’ll be more successful at saving, and overcoming the temptation to spend today if you know what your money will get you.

• This could include:

  • a down payment or renovation

  • a sabbatical or attending school

  • retirement

  • starting a business

  • or peace of mind that you’ll have a head start when something comes up

• Visualize the real outcome of your savings, and you’ll be more motivated to stick to your plan.

3. Invest your savings

• Compound growth is the single most powerful tool available to help you reach your financial goals.

  Learn more about the power of compound growth, and see what investment options are available.

4. Automate your plan

• We’re all wired to be bad at managing money, as a species, we’ve only needed to do it for a fraction of our existence.

• To solve this, set up automatic transfers of your savings into a separate account and have the money invested right away.

  Learn more about why humans are so bad at managing money and what to do about it.

5. Minimize your borrowing

• Paying interest on debt is like depositing to someone else’s savings account, and these payments add up over time.

• The more you borrow today, the more you’ll need to pay back in the future, which is likely to require a reduction in your lifestyle.

  Learn ways to pay off debt faster or minimize borrowing in the future.

6. Revisit your expenses

• List your expenses and see if there are one of two opportunities:

  • Lower your bill by speaking to the service provider, for instance, cable or insurance company, and negotiating a reduction.

  • Cancel the purchases or service if it’s not bringing you enough value.

• A budget allows you to get the most from your money by starting with your highest priorities and ensuring you always have enough for what makes you happiest.

  Learn more about lowering your expenses and setting up a budget.

  Get the most from your money with our budgeting tool and 5 step walk-through.

7. Minimize your taxes

• The government has created many incentives to help you manage your money and pay less in taxes.

• From tax-saving accounts like the TFSA, RRSP and RESP to tax credits like the First-Time Home Buyers' (FTHB) or Canada Child Benefit (CCB) there are lots of ways to save.

  See more ways you can save on taxes.

8. Protect yourself from the unexpected

• One of the most overlooked topics of personal finance is planning for the unexpected.

• It’s important to be prepared by setting up the following:

  • Establish an emergency savings account to cover 3 to 6 months of essential expenses.

  • Ensure you have enough life, disability and property insurance to avoid a life-altering loss.

  • Set up a will once you start a family or begin building your assets.

  Learn more about how insurance works and how much you may need.

What should I do first?

You can improve your current situation by taking the following steps:

1. Pay off high-interest debt (e.g., credit card)

2. Enroll for any retirement plans with your employer if they make contributions

3. Create an emergency fund for unexpected expenses

4. Pay off medium-interest debt (e.g., student loans)

5. Invest your savings in an account that lowers your taxes (e.g., TFSA, RRSP, RESP)

6. Pay off low-interest debt (e.g., mortgage)

7. Set up a traditional non-registered investment account

   Each line links to supporting material to help you achieve that step.

While you’re working towards the above steps, you can also complete the following:

• Set up a budget and track your spending

• Purchase appropriate insurance coverage for your needs

• Create a will as your situation requires it

• Identify a list of goals (e.g., retirement, down payment)

• Determine your desired risk level for each goal

• Decide on a diversified investment option for each goal

• Consolidate your account data to monitor your progress

  Each line links to supporting material to help you achieve that step.

How much do I need to save for retirement?

If you’re starting early, typically in your early twenties, the rule of thumb is to save 10% of your income for retirement.

Another benchmark is to aim to have twice your income in savings by age forty and eight times your salary by sixty-five. The below table demonstrates how your savings can grow over your working life to provide in retirement.

The amount you need to save depends on when you want to retire and what your retirement will involve. You can learn more about how the 10% rule works and what to consider to ensure your retirement is everything you’re imagining.

How do I start investing?

There are seven steps to investing your money today:

1. Set a goal

2. Set a timeline

3. Decide your risk level

4. Decide your involvement

5. Pick a product

6. Open an account

7. Deposit your money

Learn more about each step and how you can start investing today.

We recently released a three-post series answering the question, ‘Where do I start with my money?’ You can review the relevant sections of each post for the steps that apply to your unique situation.

1. Major life events

2. Your current financial situation

3. Your goals and financial behaviour

The Snowman’s Guide to Personal Finance was written to help more Canadians get the most from their money. If you’d like to read the full book or gift it to a colleague, friend or family member, it’s available for purchase here. To ensure it’s accessible to as many people as possible, the content is also available entirely for free here on the website.