The Complete Guide to Personal Financial Planning: Canadian Edition

We could all benefit from better financial habits and savings plans, but it seems so daunting to many of us. In fact, the average Canadian only has about $5,500 in their savings in total, meaning that there’s a lot of room for improvement.

Luckily, there are some simple steps you can take now to prepare yourself for a bright financial future. Let’s talk about personal financial planning in 2021.


Why Personal Financial Planning is So Important

Before we jump into how to start your financial planning, it’s important to know why it matters in the first place. Having a concrete plan helps you in many ways, instead of just trying to “do better”. Here are some examples.

Crunching the Numbers

Planning a budget and your financial future without crunching the numbers is like trying to run an obstacle course blindfolded. How are you supposed to know your savings goals, how you’re going to reach them, how to prepare for emergency expenses, and more if you don’t know the numbers?

This is arguably the most important factor in financial planning, as it gives you the most insight into where your money is going, how it’s coming in, and where your savings will be years from now.

Having a Concrete Plan

Establishing a plan for yourself is the best way to start seeing results. Having a roadmap in place allows you to see the bigger picture more clearly, understand how to limit your expenses, and make more responsible decisions with your finances.


When you create a personal financial plan, you give yourself metrics to track over time to ensure that you’re doing things correctly. If you just say “I’m going to be better with my finances”, you’ll have no way of verifying that you’re hitting your goals or even heading in the right direction.

Boosting Your Credit Score

When you improve your financial health, you’ll likely see a boost to your credit score, which has many positive effects on your life. You’ll open new doors and opportunities for yourself, just make sure that your credit score is a factor in both your financial education and planning.


How To Plan Your Personal Finances

Now that you know why having a concrete plan is important instead of just winging it, you’re hopefully inspired enough to get started on a plan of your own. While everybody’s personal financial situations are different, there are some tactics to use that work for just about everyone. Here’s how to get started.

Crunch The Numbers

Yes, we mentioned the importance of this, but let’s reiterate how exactly to do it. First, you want to look at your financial statements for an entire month. Yes, a whole month. Weeks vary dramatically, so it’s best to see an entire billing period and where your money goes during it.

Try to avoid spending cash during this month if you can, and look through your checking history, credit card statements, and more. Divide your spending habits into certain categories and see where they end up. Start with smaller categories like:

  • Eating out
  • Groceries
  • Bills
  • Subscriptions
  • Clothes
  • Small purchases
  • Shopping
  • Entertainment
  • Investments

To clarify, for “small purchases”, we mean those one-time “oh, it’s only $5” purchases. You may be surprised how much they add up. Also, did you know that the average consumer spends $273 on subscriptions every month?

Of course, your bills should be the highest on the list, and there’s probably not much you can do about them without downsizing a bit. If you can downsize on your bills by changing your phone plan, switching utility companies, or more, then, by all means, do so. However, you mostly want to see where your “fun money” is going.

Create Goals

Both long-term and short-term goals are critical to a budget. They will not only help you develop your plan, but they will also help to keep you motivated when budgeting becomes challenging.

Think of your budget exactly like a diet for your finances. There’s a fine line to tread between achieving your goals and preventing yourself from going overboard. There’s no need to be unrealistic.

Just like a diet, you don’t want to be overly restrictive to the point where you get zero enjoyment out of it and just give up. That’s a waste of your time, energy, and mental health. Instead, focus on smaller, short- and long-term goals that you can adhere to.

Your goals are going to be unique to whatever it is that you want. Are you looking to buy a home? Save for retirement? Send your child to college? Well, keep that in mind as motivation and follow the metrics as time passes in order to make sure you’re reasonably on track.

It’s also important to have small goals and milestones to celebrate periodically. “I want to have $5,000 in my retirement account by the end of the year”, “I want to reduce my monthly subscriptions by a third”, and “I want to have an extra $1,000 in my savings in 2 months” are all great examples.

There are excellent ways to achieve these goals, too. Here’s an example.

Follow the 50/30/20 Rule

Once you know your overall monthly income, try to divide it into 3 separate categories. We suggested using smaller categories at first, but for this exercise, you will combine them. Don’t worry, the smaller categories will help you reduce your expenses later on.

The “50” represents the largest portion of your budget. You should be allocating around 50% of your budget toward the essentials. This includes bills, groceries, and yes, even WiFi.

The “30” represents your fun money. These are the things you want to buy. Nobody should feel bad about spending their money on things that they want, it’s just that putting a limit on it offers many benefits.

The “20” represents your investments. Aim to put 20% of your income into savings, retirement funds, stocks, purchasing a home or a rental property, starting a business, or whatever investment you would like to make. Aiming for 20% is perfect.

Now, there are a few things you can do to limit your essential expenses. You can try using coupons at the grocery store, limiting your usage of utilities, and more. If you can get that number closer to 40%, then that’s even better. Use that extra 10% to prepare an emergency fund for things like car or home repairs, medical bills, or other “rainy day” expenses.

Overall, try to limit your wants as much as you can. Ask yourself if you really need those extra subscriptions, if you really need to go shopping, or if you can eat from home instead of going out. This will ultimately help you focus on increasing your investments and gaining financial stability and independence down the line.

Try to Increase Income

Increasing your income is just as good, if not better, than reducing your expenses. When you combine the two, you can turn your bank account into a savings machine.

Asking for a raise at work or starting a side hustle will help you reach your savings and personal financial goals, especially if you are working to limit your expenses. You can even put this money directly toward your savings for a vacation fund, retirement fund, investments, or whatever you want.

Use Debt Wisely

Debt is your friend when you use it correctly. If you opened your first credit card and car loan at the age of 18 and used them responsibly for years, then you’ll be saving thousands of dollars when it comes time to buy a house in your 30s or 40s.

Paying off your credit cards every month avoids interest, gives you money to spend upfront, builds up points, and boosts your credit score. If your credit score could use some improvement, consider a no credit check loan to start building your score back up.

Now, it’s okay to leave a small balance on your credit card once in a while, as this can actually improve your score, but developing these habits will save you a lot of money on interest for future loans and open new opportunities for you throughout your life.

Don’t Overlook Retirement

One of the biggest pieces of financial planning is too often overlooked. Retirement should not only be part of your financial planning, but it should be the core of it.

The average Canadian who is nearing retirement age only has $184,000 saved for retirement. Which, we shouldn’t have to tell you, is not nearly enough. You should be planning to live a long and healthy life without having to worry about running out of money.


Be Consistent

The key to personal financial planning is simply consistency. Don’t bite off more than you can chew and don’t take on a workload that you can’t handle. Be consistent, be mindful, remind yourself of why you’re doing this, and you will start seeing results in no time. Stay up to date with our latest financial news and feel free to contact us with any questions.

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Get your online loan, paperless & fast.

Quick Personal Loans for Canadians :

  • No credit investigation
  • No documents required
  • Repay in up to 90 to 120 days
  • $500 short-term loans