Money 101: 50 tips to build a better financial future
Rising costs, fluctuating interest rates, and an uncertain economic climate.
The financial challenges of today can sometimes get in the way of your dreams and goals for tomorrow.
But the great thing about the future is that it hasn’t happened yet.
Whether you’re looking to build savings, pay down debt, or finally have the financial freedom to take advantage of a deferred salary leave—the days to come can be anything you want them to be.
All it takes is the right plan, a little guidance, and the commitment to keep your eye on the prize.
Whatever your ultimate goals are for tomorrow, here are 50 tips to build a better financial future:
Part 1: Building a strong foundation
1. Create a budget and stick to it
Just as curriculum serves as an educational roadmap for instruction, a budget serves as your financial guide for taking better control of your money.
2. Understand your pay grid and salary progression
Your salary increases are based on a variety of factors (i.e. years of experience, taking on extra responsibilities, accumulating various levels of post-secondary education, etc.). To move up the pay grid quicker, you may want to consider taking courses, pursuing advanced degrees, or volunteer to coach your school sports team or chaperone events.
3. Open a separate account for savings
Having a dedicated savings account keeps your money out of sight, making it less tempting to spend. Setting up pre-authorized contributions (PAC) can help you stick to your savings goals—and the best part is, you don’t need a lot of money to get started.
4. Start an emergency fund (of at least 3 to 6 months’ worth of expenses)
Saving money for the unexpected ensures you’ll have the funds to deal with an emergency, should one arise—without having to rack up credit card debt, take out a loan, or divert money from other needs and goals.
5. Automate bill payments to avoid fees
In addition to needlessly wasting money, late payment fees also negatively affect your credit rating. Paying your bills on time will help to keep that rating in good standing, which is important if you’re looking to one day take out a loan to buy a car, purchase a home, or renew/refinance an existing mortgage.
Part 2: Building smart debt management strategies
6. Limit the frequency of your credit applications
If you’re looking to apply for a credit card or any other type of loan, choose one to apply for at a time. Since credit scores are designed to gauge how big of a credit risk you are, applying for multiple credit accounts at once could indicate that you’re in financial trouble—which then lowers your score.
7. Avoid payday loans and ‘quick cash’ traps
These types of short-term loans often carry predatory interest rates. Instead, consider getting yourself pre-approved for a line of credit, which you can then access instantly in the event of an emergency.
8. Prioritize debt repayment strategies
To avoid getting caught in a never-ending debt cycle, write down all credit cards and loans—along with their balances and rates of interest. Then prioritize repayment by paying more than the monthly minimum on balances with the highest rate of interest, first.
9. Consolidate high-interest debt
If your debt load is becoming too big of a burden, consolidating all your loan and credit card balances can give you much-needed financial breathing room.
Ask us about a debt consolidation loan
If you are a homeowner, considering a refinance strategy can often be the answer.
10. Check your credit report once a year
Regularly checking into your credit report will ensure all the information contained within is accurate and, most importantly, that you haven’t become the victim of fraud.
Part 3: Building effective budgeting and savings habits
11. Trim unnecessary expenses
Divide the list of regular monthly expenses you’ve compiled as part of your budget into three categories: ‘necessities’ (food, gas, mortgage/rent, utilities, phone); ‘debt payments’ (loans, credit cards); and ‘luxuries’ (coffee, eating out, online gaming/shopping, entertainment, etc.). This will make it easier for you to see which areas you can scale back on (or cut out altogether) when cash flow is tight.
12. Plan ahead for any future leaves
If you’re planning to take any leaves down the road (4 over 5 / 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.
13. Take advantage of educator-specific discounts
Be sure to leverage exclusive discounts and benefits from sites such as EdvantagePerks or OCT MemberPerks®. Plus, many retailers and software companies also offer special pricing for education members.
14. Maximize loyalty programs
Leveraging points and cashback rewards can be a helpful way to reduce costs on everyday essentials such as groceries and gas.
15. Avoid ‘lifestyle creep’ as you move up the pay grid
Resist the temptation to inflate your spending as you begin to make more money. Instead, maximize those pay increases by directing them into savings or investment accounts.
Part 4: Building wealth through investing
16. Maximize TFSA contributions
The Tax-Free Savings Account is a must-have money-growing tool as it allows your investments to generate tax-free income. Plus, unused contribution room carries forward indefinitely, which means you can contribute what you can afford now and catch up on the rest at a later date.
17. Leverage RRSPs as a way to boost your pension income in retirement
Contributions to a Registered Retirement Savings Plan reduce taxable income while building wealth for retirement. Keep in mind, however, that your RRSP contribution room is tied to your pension benefit. The greater the value of your pension, the less available RRSP contribution you’ll have.
RRSPs: what’s fact, what’s fiction, and what’s specific to education members
18. Keep a diversified portfolio
Investing in more than one asset category helps reduce the risk of loss. That way, if one category falls, you’ll be in a better position to counteract your losses with more favourable returns in another area.
19. Consider utilizing a strategy called dollar-cost averaging
Just as a diversified portfolio minimizes your risk of significant loss, dollar-cost averaging protects you from investing your money at the wrong time (by automatically buying more of an investment when the price is low and less of that same investment when the price is high).
7 ways to make the most of dollar-cost averaging
20. Review/rebalance your portfolio once a year
A lot can happen in your life and the market over a 12-month timespan. Reviewing your portfolio with your Educators financial advisor will ensure your asset allocation and level of risk are on track with your long-term investment goals.
Part 5: Building educator-specific strategies
21. Start a summer savings fund
Creating a dedicated savings plan for summer break will ensure all other financial goals stay on track, while providing you with a cash flow boost during the time of year when you tend to need it most.
22. Buy back eligible pension credits after any type of leave
This will help you to maximize the value of your pension and ensures you reach your 85/90 factor at your earliest possible date.
23. Plan ahead for a potential pension income gap
While your OTPP or OMERS benefit will provide you with a set amount of financial security in retirement, will it be enough? Use our Pension Income Gap calculator to ensure you’re on track to the live the lifestyle you want during your ‘after school’ years.
24. Claim all educator-specific tax credits during your working years
From the eligible educator school supply tax credit to pension buybacks, there are certain tax time credits and deductions that are specific to you.
Tax credits: what you don’t know can cost you
25. Utilize pension income splitting to minimize taxes in retirement
If eligible, you can allocate up to half of your pension to your spouse or common-law partner when you complete your annual tax return (helping to reduce the amount of taxes owed).
Part 6: Building for the future using government incentives
26. Maximize the Canada Education Savings Grant
This incentive makes it worth maximizing your Registered Education Savings Plan (RESP) contributions. With the CESG, 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.
27. Take advantage of the Canadian Home Buyers’ Plan (HBP)
With the HBP, you can make a tax-free withdrawal of up to $60,000 from your RRSP to put towards your first home. That amount doubles to $120,000 when purchasing with your spouse or another first-time homebuyer. Keep in mind that withdrawals must be paid back within 15 years to avoid a tax penalty.
28. Open a First Home Savings Account
A tax-free way to put money away for your first home, the FHSA enables you to save up $8,000 a year, up to a lifetime maximum of $40,000.
29. Claim the First-Time Home Buyers’ Tax Credit
This non-refundable credit can be claimed on a qualifying first-time home purchase, resulting in a maximum tax rebate of $1,450.
30. Use the Lifelong Learning Plan (LLP) to boost your education and move up the pay grid
The LLP allows you to withdraw up to $20,000 from your RRSP, tax-free, to use towards furthering your education. These withdrawals must be paid back to your RRSP within 10 years.
Part 7: Building your legacy with an estate plan
31. Create a will
Whether you’re young and just starting out or well into your golden years, a will is an essential document to have for people of any age, as it allows you to control the distribution of your assets.
32. Minimize tax implications by creating a trust (in your will)
By doing this, you can divide the income between the trust and the beneficiaries. This means the income of the trust and the income of the beneficiaries will be taxed separately.
33. Designate a beneficiary
If you pass away without naming a beneficiary, this will delay the transfer of your assets. As an education member with a pension, designating a beneficiary also ensures that you get to decide who gets your (pension) death benefits.
34. Purchase life insurance
Helps to financially protect loved ones if you were to become incapacitated and no longer capable of providing for your family (tip: life insurance tends to be more affordable when purchased earlier in life).
35. Donate to registered charities
Doing this gives your estate tax credits that can be used to reduce any taxes owing.
Part 8: Building a path to retirement
36. Reduce/eliminate debt before retiring
Although you have your pension to provide regular cash flow in retirement, you’ll still be bringing in less money than your working years. Carrying debt into retirement further reduces your financial flexibility, so do your best to be mortgage- and debt-free by then.
37. Budget for your bridge benefit
Since education members tend to retire earlier than the average Canadian, OTPP provides the bridge benefit to supplement your retirement income (over and above your lifetime pension amount) until age 65—when you’re eligible for unreduced CPP payments.
38. Update your investment plan
In retirement, your portfolio will have less time to recover from sudden downswings, so you’ll want to meet with your financial advisor to potentially discuss lower-risk investment options.
39. Research (and budget for) insurance benefits
Once you’re retired, you’ll assume the costs of your family’s medical benefits, such as vision, dental, and prescription drug coverage. Depending on the scope of your needs, this can be quite the sticker shock if you don’t budget for it ahead of time, so be sure to plan ahead.
40. Maintain your status
Just because you’re retiring doesn’t mean you have to give up being an educator. Maintaining your membership as an Ontario Certified Teacher keeps the door open to teach or instruct part-time and earn a little extra income in retirement.
Part 9: Building tax-saving strategies in retirement
41. Open up a spousal RRSP
This allows for income balancing for the higher income-earning spouse (couples that have equal income basically receive double the tax deductions—i.e., income splitting)
42. Create an RRSP withdrawal strategy
If you wait too long to withdraw from your RRSP, you could inadvertently push yourself into a higher tax bracket. Developing an RRSP withdrawal strategy ensures you won’t be left scrambling the year you turn 71 (when you are required to convert your RRSP into a RRIF).
43. Take advantage of tax-loss selling on lower-performing investments
If you hold an investment that has lost value during the year, selling it may be beneficial from a tax perspective (as the loss can reduce capital gains on other investments).
44. Name beneficiaries for your registered plans
By doing this, RRSPs and other registered plans can be transferred tax-free to your spouse’s plan, for example—bypassing the estate process altogether (which means these funds are not subject to probate fees and there is no delay in your beneficiaries receiving the money).
45. Maximize eligible tax credits
As you enter retirement, you’ll most likely be receiving a handsome pension benefit and therefore ineligible for most of the smaller tax credits and deductions offered by the CRA. However, depending on your financial situation, there are certain tax credits you could still potentially leverage—such as the Canada caregiver credit and deductions for home accessibility expenses.
Part 10: Building your financial literacy for every stage of life
46. Research before making decisions
Whether you’re deciding between a fixed and variable-rate mortgage or trying to figure out why education members should think twice about generic advice when it comes to the pension-income tax credit, it’s always best to look up your options (or ask an Educators advisor) before taking a financial leap.
47. Attend (virtual) workshops
Check out our website throughout the year for financial planning workshops and webinars that cover a wide spectrum of topics.
48. Browse The Learning Centre
From how to build up savings and pay down debt to our ‘101’ series on TFSAs, home buying, early retirement, and more—our online resource centre is filled with in-depth articles, tools, and calculators to help boost your financial literacy on a wide range of topics.
49. Sign up for Educators eNews
Keep up with the latest financial news and get first access to exclusive tips, resources, and special offers with our monthly email.
50. Get in touch with Educators Financial Group
For 50 years, we’ve been helping education members to navigate financial challenges and achieve their dreams and goals. So, if you’ve got a specific money question, we’ve got an educator-specific answer.
Reach out to start building your better financial future today
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