Mastering personal finance in Canada means getting a confident handle on all the ins and outs of your money. This means you have a good grasp of not only where your money is coming from, but also where it's going and how you can use it to take care of your present and future self.
Let's face it. You know personal finance in Canada is essential, but turning your finances around isn't easy. It takes a lot of dedication to master every aspect that you're expected to know as soon as you become an adult. But the truth is, most of us are just doing what we can while wishing we knew better.
That's why we created this guide to the basics of personal finance in Canada. If you get these 6 building blocks under your feet, from budgeting to taxes, you'll be well on your way to feeling secure with every money choice you make. And don't forget to pick up a few books and tools along the way to make learning easier.
Let's dive in.
Key Takeaways
- Personal finance covers anything to do with managing your money, whether that means saving it, investing it, or even paying taxes on it.
- The main building blocks of personal finance to get a handle on include budgeting, taxes, and saving money.
- Personal finance tips and rules are changing all the time. Embrace the lifelong journey and don't expect to get it all right all the time.
The 6 building blocks of personal finance in Canada
If you want to get a better handle on your finances, you can start building a solid foundation by learning about budgeting, taxes, investing, credit, debt, and the ultimate goal of retirement.
1. The basics of budgeting
At its base, budgeting is making a plan for all your money, whether that's income that comes in every month or a stash of cash you already have. Having a good budgeting discipline is one of the most important foundations to your financial health.
Yet only about 49% of Canadians have a budget. And that's understandable, really. Not only does budgeting make you face your finances, you also have to develop a plan around them, make adjustments as needed, and actually follow through. There's a lot of friction between you and your budget – and you need to stay on top of it continually to get any benefit out of it.
So how can you make that happen? Well, you need to find something that works for you.
- Do you prefer to sit down once a month and manually categorize all your payments, allowing you to keep up-close-and-personal with your spending? Then adopting a budget spreadsheet may be a good plan.
- But if you know you'll never be able to keep that up, then using an automated budget software could help. That way, your money gets categorized automatically and you can check in whenever you have a minute to make sure you have enough room in your budget to buy something.
- There are also some less conventional ways of budgeting, like the zero based budget, envelope method, and the 50/30/20 budget.
Taking some time to try each method out may be one of the best ways to find one that actually works for your needs.
2. Taking control of your taxes
While inevitable, taxes can still be stressful and confusing even at the best of times. Learning what you owe, why you owe it, and how to get the most back in your pocket is essential for keeping your finances on the right track.
There are a few types of taxes that Canadians pay. The most common type you'll encounter is sales tax, which is the type of tax that's added on to your purchases and you see on the bottom of your receipt.
But while there's not much you can do about paying sales tax (except moving to another province maybe), income tax is another huge price you pay – but this time, researching and planning ahead can make a huge difference.
This is because of things like tax credits and deductions, which can either reduce how much you owe directly or give you extra money which can help cover your balance. Keeping an eye on these options can be a lifesaver once you start making enough money that you actually start owing the government every year.
Here are some examples:
- Any contribution you make to your RRSP or FHSA is deductible from your tax that year.
- If you bought a home for the first time, you can receive first time home buyer credits.
- Things like moving expenses, child care, and even working from home can be claimed as deductions.
- Tuition and medical tax credits can also be a huge help.
3. Iron out your investment plan
Investing can sound scary, but even something as simple as putting some extra funds in a high interest savings account is a low risk, low return type of investing. Since you already have that under control, you can move on to slightly higher return options and take on a bit more risk as you feel comfortable.
While DIY investing options do exist, which usually involves trading stocks and other investments through an online broker, you don't have to do it alone. There are plenty of options to get you started that don't require you to be an expert.
- Guaranteed Investment Certificates (GICs): If you're comfortable with savings accounts but want to earn a bit more money, GICs are the next step up. The main difference is you have to lock your money in for a set amount of time, but you'll get way higher rates than savings accounts – and they're guaranteed to stay that way your whole term.
- Financial advisor: If you want to be guided by an expert, setting up an appointment with a financial advisor will give you a personalized approach to your investments. Just remember to aim for a fee-based advisor so you know they aren't motivated by commission.
- Robo advisor: If you want to dip your toes into stock market investing yourself, a robo advisor is a low-fee alternative to an online broker. All you do is deposit your money into an account, and the algorithm will invest your money in a variety of ETFs for you. This is an easy way to really diversify your portfolio without being an expert.
If the thought of improving your investing game excites you, check out our full guide on how to invest in Canada like a pro.
4. Cultivate your credit score
Building and maintaining a good credit score is your ticket to being eligible to take out cheaper loans and getting more valuable credit cards. Because this score is based on how you use your existing credit, you need to actually use your credit in order to build it.
Grabbing a credit card when you're a student is an easy way to get your foot in the door, since eligibility requirements are usually lower at that time. But if you missed that boat, grabbing a secured credit card is your best alternative.
Once you have access to credit, make sure to pay off all your bills on time and try not to max out your cards to keep your score healthy.
You can get free access to your credit score to keep an eye on your progress through Equifax, Credit Karma, Borrowell, and more.
5. Deal with your debt
Debt is one of the scariest things about personal finance, but it's important to remember that most people have debt – whether it's from student loans, mortgages, car loans, or even credit cards. And some of these things are even considered "good debt," which basically means it'll pay off over time.
So not all debt is bad, but the key is managing it wisely. Dealing with your debt could mean a number of things, including:
- Figuring out how much you need to pay every month to get ahead, and executing on that every single month.
- Consolidating your debt under one loan so you can simplify your payments and maybe even lower your interest rates.
- Considering a consumer proposal or even bankruptcy if your debt is becoming too much of a burden on you.
No matter what situation you're in, you can make a plan to get your debt under control.
6. Rev up your retirement planning
Finally, the ultimate goal at the end of most of your investing is your retirement plan. In Canada, we have a few systems in place to provide us some income after we've passed our working years, but this often isn't enough to maintain the same lifestyle you've built for yourself during your working years.
In order to combat that, starting your retirement plan as early as possible can set you up for much more comfortable golden years.
In general, this can mean investing in your RRSP and other accounts. This could also mean establishing your will and estate well ahead of time so your loved ones are protected in the worst case scenario.
If you'd like to think more on this topic, check out our guide to retirement planning in Canada.
5 best personal finance books
One of the best and most effective ways for many people to learn about personal finance in Canada is through books. These are often accredited sources that can provide an in-depth look at specific areas of your finances and help you think about things in a new light.
People do have very specific reading preferences, though, so if you have other book recommendations, we’d love to hear from you. Add your suggestions to the comment section at the bottom of the page.
1. The Big Book Of Smart Saving
- Author: Stephen Weyman
- Price: Free!
- Best for: Anyone new to personal finance
- Link
Organized into 8 sections and available in a convenient eBook format, The Big Book Of Smart Saving offers advice for those new to Canada’s personal finance world as well as those looking to reevaluate their plans or strategies.
You’ll learn about spending, banking, credit cards, and a heck of a lot more. You can find this book here on our moneyGenius site – just click to start the download.
2. The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness
- Author: Morgan Housel
- Price: $17.84 (paperback)
- Best for: Investors
- Link
Since most of Canada’s personal finance decisions are made around a kitchen table or on the couch, why does so much financial advice involve spreadsheets and formulas?
This author explains how, since we’re a people with complicated relationships, we base many of our decisions on both knowledge and feelings. Housel teaches plenty of valuable lessons here that can help investors form better plans for making better financial decisions.
3. Never Split the Difference: Negotiating as if Your Life Depended on It
- Author: Chris Voss
- Price: $25 (paperback)
- Best for: Entrepreneurs
- Link
Former police officer and FBI agent Chris Voss uses this book to teach others how to adapt his kidnapping negotiation skills for everyday consultations and conferences. You want simple, direct answers, just like the FBI does.
Whether you’re applying for a loan, trying to impress investors, or even hire employees, Voss’ tips come in more handy than you might think. Your business dealings will never be the same.
4. Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones
- Author: James Clear
- Price: $28 (paperback)
- Best for: Trying something new
- Link
Humans are creatures of habit, and our habits can control all aspects of our lives, including our finances. Here, the author explains that we can achieve big outcomes just by introducing small changes into the areas we’re hoping to change.
So go ahead and break those bad financial habits so you can take on new, healthier, more lucrative ones.
5. The Total Money Makeover: A Proven Plan for Financial Fitness
- Author: Dave Ramsey
- Price: $36.75 (hardcover)
- Best for: Turning things around
- Link
Here, Dave Ramsey lays out practical steps for changing your financial habits so your end result is a smooth, well-functioning system and a fat bank account.
You’ll read Ramsay’s plan for paying off debts, his thoughts on money myths that can lead you down the wrong path, and the importance of emergency planning. It’ll require laser-sharp focus and total dedication, but achieving financial peace is worth it.
3 favourite personal finance apps and tools
Using the right personal finance apps and tools can be a huge help in streamlining your money journey. Here are 3 of our favourites in Canada.
1. creditcardGenius
- What it’s good for: Finding the right credit card
- Where to get it: Site
Full disclaimer, this is our product – but we think it’s so helpful, we included it here.
creditcardGenius is a free credit card matchmaker that shows you the best credit cards based on your own personal spending habits and preferences.
And if you want some extra rewards, you can check out the GeniusCash offers page. Right now there are 15 offers worth up to $125 available – and the money gets sent straight to your bank account or PayPal if you’re approved through our link.
Learn more here:
GeniusCash is a cash back program that rewards users for subscribing to many of the products and services they use on a regular basis. Plus, its new GeniusCash mobile app makes it easier than ever to bank real cash and level up your rewards.
- New industry-leading mobile app
- Up to $250 cash back
- Flexible payout options
- Bi-weekly payouts
- Cash back bonuses are harder to get
- Only a limited amount of offers available
- No cash bonus on sign up
- Age of majority
- Eligible to receive select Canadian credit cards
- Up to $250 in bonus cash back
- Easy to use mobile app for even more deals and exclusive offers
- Payments are made directly to you via PayPal or Interac e-Transfer
- Referral bonuses available via the GeniusCash app
2. Rakuten
- What it’s good for: Earning cash back online
- Where to get it: Site, Google Play, App Store
If you haven’t heard of Rakuten, prepare to be excited about your next online shopping trip.
Rakuten gives you cash back at over 750 stores – just for using their link to visit the store.
And if you join right now, you can get a $30 welcome bonus.
3. Flipp
- What it’s good for: Grocery deal hunters
- Where to get it: Site, Google Play, App Store
One of our favourite personal finance tips is to compare prices at multiple different stores before you buy something – and Flipp makes that so much easier.
In one app, you can browse thousands of weekly ads and flyers for your local stores in Canada – so you know where the best deals are at all times.
What does personal finance in Canada mean to you?
How is your personal finance journey going?
Do you have any tips to share with other Canadians who are trying to make the most of their money?
Let us know in the comments below.
FAQ
What is personal finance in Canada?
Personal finance is all about managing your money in a way that works for you. In a money-driven society, you need to know how to earn, when to save, and when to splurge.
How do I start learning about personal finance?
The 6 main cornerstones of personal finance are budgeting, taxes, investing, credit, debt, and retirement. Start working on getting comfortable in each of these areas, and you'll revolutionize your finances.
Where can I learn about personal finance in Canada?
One way to learn about what's going on in the world of Canada personal finance is to sign up for the moneyGenius newsletter. Once or twice a week, you'll join 42,000+ Canadians and get the latest financial tips and money news.
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