The Learning Centre:
Now here are 4 other ways to take better control of your finances.
As an education member, you’re one of the fortunate group of Canadians with a defined benefit pension plan in place.
‘Sweet’—as your students would say.
Yet according to the Educators Financial Kickstart Challenge, only 53% of you think your pension will actually be enough to fund your ‘after school’ years.
If you’re a part of the ‘unsure’ 47% (or even the confident 53%)—there is always room to take better control of your finances to ensure peace of mind at every stage of your life.
#1: START BY SETTING FINANCIAL GOALS (OTHER THAN RETIREMENT)
Two years into the Educators Financial Kickstart Challenge and we’ve discovered that 55% of education members have not set any financial goals for the next 5 to 10 years.
However, just because you’ve got OTPP or OMERS to rely on in retirement, doesn’t mean you should become complacent when it comes to setting other financial goals to work towards between now and then.
If you’re early in your career, perhaps you want to pay down debt and switch from renting to owning a home. If you’ve been working in education for a while now, maybe you’re looking to pay your home off sooner, save for your children’s post-secondary education, or take advantage of a deferred salary (‘X over Y’) leave. If you’re retired, then perhaps you’re looking for ways to make your pension income work harder for you.
No matter where you are on the timeline of your professional life, one thing is for certain… time and tide waits for no one. Setting financial goals for the journey between now, retirement—and beyond—will ensure you are prepared to pay for every minor and/or major life event along the way.
Tips for setting financial goals:
- Approach it in the same way as you would set up your lesson plan for the school year
- Map out WHAT you want to accomplish (I.e. save for the ultimate trip in the summer months, deferred salary leave, children’s education, emergency fund, etc.)
- Assign a timeline as to WHEN you want to accomplish each of those items
- Then work backwards to figure out how much you need to save in order to achieve those goals
Learn more about how to set goals, assign timelines, and put your own financial plan into motion.
#2: CREATE (AND STICK TO) A BUDGET
Then why is it that the latest numbers from Statistics Canada has the national household debt-to-income ratio climbing to an all-time high of 173%? (This time last year it was at 169%) That means for every dollar in household disposable income, Canadians now carry $1.73 in credit market debt (which includes consumer credit/cards and mortgage/non-mortgage loans).
Then there’s the admission from education members themselves that they need help when it comes to getting a handle on their budget:
- 54% of education members have debt they would like to get under control
Above statistics courtesy of the Educators Financial Kickstart Challenge
So the lesson here: coming up with a plan on how to budget the rest of your after-tax income is essential to avoid getting caught in the debt trap.
Tips for creating and sticking to a budget:
- Prioritize spending into ‘needs’ vs. ‘wants’
- Set up separate accounts/investments for your financial goals
- Have contributions to those separate accounts withdrawn automatically from your regular account
(to avoid the temptation of ‘spending’ what you could be ‘saving’)
- Fine-tune your budget as time goes on
Most importantly—make the commitment. Like starting a fitness regimen or quitting smoking, budgets take time a whole of discipline to establish as ‘routine’. Committing is half the battle—so if you’re serious about taking control of your finances, you’re already half way there.
#3: START ACTIVELY PAYING OFF YOUR DEBT
While debt is necessary to establish credit, carry too much of it and debt can become a burden—particularly as interest rates steadily creep up.
Yet paying off debt can be easier said than done.
With pension plan contributions, a salary dependent upon where you are on the pay grid, as well as the need to be financially sustainable throughout the summer—balancing your income-to-debt ratio can feel like a real challenge.
But it’s not impossible.
Tips for paying down debt:
- Shop around for lower interest rates—an instant way to start paying more towards the principle
- Consider consolidating multiple high-interest debt into one low-rate option (not only can this reduce the timeframe of paying off debt—but also has the potential to save you a ton of money in interest payments in the long run)
- As you start paying down loans and credit cards, consider lowering credit limits to avoid racking balances back up
Paying excessive interest on loans and credit cards? Our low-rate lines of credit could be just the relief you’re looking for.
#4: TRIM EXCESS SPENDING
Paying for a gym membership you never really use or a cable package you never watch? Taking better control of your finances also means cutting back on monthly expenses that aren’t really doing anything for you (other than eating up a portion of your budget).
Tips for trimming excess spending:
- Review your monthly bank/credit card statements—identify any automatic withdrawals being made for services you’re no longer using, then cancel them
- For the services you’re using, consider calling the customer loyalty department to negotiate better rates
- Comparison shop — it is the best way to ensure that you are getting your best deal with the service provider you are with
If you’re looking to trim some serious excess spending, click here for 5 tips for saving up to $500 a month.
Need guidance on taking better control of your finances? Call on us for educator-specific advice.
Since 1975, Educators Financial Group has been providing financial advice exclusively to members of the education community—which means we have a unique understanding of everything from ‘pay grids’ to ‘pension plans’. It’s the kind of insight that puts us in the perfect position to help you take better control of your finances and achieve your ultimate goals.
Have one of our financial specialists contact you to get started today.
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.