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.
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)
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 If the amount withdrawn is paid back within 15 years, it’s not taxable.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.
In summary, the 3 steps for building your financial plan are as follows:
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.
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The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting or professional advice. Please ensure to consult your accountant and/or legal advisor for specific advice related to your circumstances. Educators Financial Group will not be held responsible or liable for any losses, costs, damages or expenses incurred by reason of reliance as a result of the aforementioned information. The information presented was obtained from sources that are believed to be reliable. However, Educators Financial Group cannot guarantee their completeness or accuracy.