Your Guide to Lifelong Earning for Educators

STEP 1: Set goals (because your money needs a sense of direction).

According to Statistics Canada, 46% of Canadians don’t have a financial plan in place. That’s almost half the country spending/saving money with no rhyme or reason.

While a financial plan gives your money ‘purpose’, setting goals gives that purpose a sense of direction.

Tips for setting goals

• Your goals should be specific, e.g. a down payment on a home, supplemental income during a deferred salary leave, an emergency fund, building up a financial cushion to add to your pension income in retirement, etc.
• Determine how much money you want to save for each goal, e.g. how much of a down payment you want to make for the house you want, etc.
• Set the timeline in which you want to achieve each goal. For example, if your goal is to save $50,000 for a down payment on a home within the next 5 years, you will then be able to gauge how much you need to put away each month in order to achieve that goal.
• Review and then prioritize goals by importance, i.e. which ones are the ‘must-haves’ versus the ‘nice-to-haves’, just in case your budget doesn’t afford the ability to save for them all.

STEP 2: Create a budget (and stick to it).

Once your goals are established, the next step is putting together a budget to determine how your income will be divided in order to achieve those goals within the set timeline(s).

As an education member, you have a few advantages when it comes to developing your budget:

Pay grid: Having a sense of your earning potential over the course of your career enables you to project when you’ll (potentially) be able to allocate more money towards each of your goals.

Pension plan: Having this in place means you’ll be able to gauge retirement income—beneficial for deciding if and how much of a financial cushion you want in addition to your pension. You then only need to work backwards to determine how much you should save to achieve that amount by the time you reach your 85 or 90 factor.

Did you know?
1 in 5 educators under the age of 30 are occasional teachers—yet you don’t have to be working in a full-time, permanent position before you can contribute to your pension. If you’re certified by the Ontario College of Teachers and work for a participating employer, you’re vested. Once you work more than 10 days in a school year for a participating employer, you’ve earned a qualifying year of credit. (Source: Ontario Teachers’ Pension Plan)

Tips for developing your budget

• Get a handle on your cash flow. Mark down what’s coming in and what’s going out (money-wise). Whether you jot the numbers down manually or use an online tool, a budget won’t work until you get the full 360-degree view of your financial situation.
• Trim unnecessary expenses. Once you have a list of your monthly expenses, divide it into three categories—necessities (e.g. food, gas, mortgage/rent, utilities, phone); debt repayment (e.g. loans, credit cards); and luxuries (e.g. coffee, eating out, online gaming/shopping, entertainment, etc.), then see which areas you can trim, or cut out altogether. You can then allocate the extra cash towards saving for your various financial goals. When evaluating your expenses, don’t forget to factor in the time of year when you likely spend more on fringe purchases (e.g. summer months, birthday gifts, holidays, etc.).
• Build (up) an emergency fund. No matter how much we plan, life tends to throw us curve balls every now and then … the car breaks down, appliances stop working, collective bargaining. Saving money for the unexpected ensures you’ll have the funds to deal with an emergency (should one arise) without having to take out a loan or take away money from other savings goals.
• Plan for any leaves. If you are planning to take any leaves down the road, like a 4 over 5 or X over Y, maternity, etc., you may want to build a savings plan into your budget to buy back pension credits to cover that leave. According to the Ontario Teachers’ Pension Plan, paying for a $10,000 leave could increase your pension by about $1,880 each year. If you were to spend 30 years in retirement, this could mean as much as $56,000 more!

STEP 3: Maximize your budget by leveraging government incentives (whenever possible).

From buying a home to saving for your child’s post-secondary education, some big-ticket goals are made a little easier to achieve, thanks to a few government perks.

Goal: Down payment for a home
Incentive: Home Buyer’s Plan

This incentive enables first-time homebuyers to withdraw up to $25,000 from their Registered Retirement Savings Plan (RRSP) to use for a down payment. If you have a partner or a spouse, they can also withdraw from their RRSP for a total of $50,000 to put towards a down payment. If the amount withdrawn is paid back within 15 years, it’s not taxable.

Goal: Save for child’s education
Incentive: Canada Education Savings Grant (CESG)

This incentive works in tandem with your Registered Education Savings Plan (RESP) where you’ll receive an additional 20% of your RESP contributions. This equals up to $500 annually, up to a lifetime maximum of $7,200 per child.

Goal: Emergency fund, summer cash flow fund or other short/long-term goals
Incentive: Tax-Free Savings Account (TFSA)

With an annual contribution limit of $5,500, this investment option enables you to withdraw money without incurring tax penalties. The cumulative TFSA contribution room for 2018 is $57,500.

The more you enhance your financial literacy regarding all of the incentives and advantages available to you, the better equipped you’ll be to maximize every dollar you contribute towards your goals.

Need help building YOUR financial plan? Educators Financial Group can help with that.

Since 1975, we’ve been putting together financial plans that have been helping education members achieve their financial dreams and goals. From pay grids to pension plans, our knowledge of your pay structure during your working years and in retirement gives us the unique insight to offer the kinds of educator-specific strategies you won’t find anywhere else.

Are you looking to develop a financial plan from the ground up? Perhaps there have been some changes in your life and it’s time to review/update your current plan?

Have an Educators financial specialist contact you to ensure you’ve got the right plan in place!