Pay off any debts
Before you start putting some funds aside, make sure you’ve either settled or have a plan for paying off all your debts.
This could include credit card debt, the mortgage on your house or even the remaining balance on a student loan.
You don’t want to keep racking up on interest charges while trying to save — especially with rates as high as they are currently. Loan and mortgage interest rates have already risen sharply after the Bank of Canada raised rates eight times since March 2022.
If you’ve got multiple lines of credit to take care of, look into your options and start reducing your debt load. You could try negotiating with your lender or consider a debt consolidation plan that keeps you on track and with a lower interest rate.
Use the right investment accounts
Does your employer offer a pension or matching Registered Retirement Savings Account? Or are you getting your own tax breaks by contributing to your own personal RRSP account?
If you don't have a pension through your employer, look into opening your own RRSP and a TFSA. Decide which option works best for you and start shuffling funds into your preferred retirement vehicle.
RRSP vs TFSA: Which is best for you?
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RRSP: This retirement account allows you to divert some of your pre-tax income into a Registered Retirement Saving Account. This reduces your taxable income, so the higher your income is, the bigger your tax savings are. The great part is your money grows tax-free until you withdraw it in your retirement years. Your employer may offer an RRSP with matching contributions. You can also set one up on your own and contribute to it. The amount you can contribute is based on your deduction limit and unused contribution room - which you can find on your notice of assesment from the Canada Revenue Agency.
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TFSA: This savings and investing vehicle lets you pay taxes up front for your contributions, but when you withdraw your money in retirement, your earnings are tax-free. There's a limit on the amount of money you can contribute each year, but unused contribution room rolls over, so it might be time to play catch-up. If you don't have a TFSA opened, consider opening one today..
Look for more sources of income
Instead of just stashing a bit of money from your paycheque into your retirement account, consider investing it instead.
Although the stock market’s been rocky lately, this could be a good opportunity to buy shares while they’re cheap. Consider building your portfolio with sectors that traditionally perform well throughout economic cycles, like health care, utilities and consumer staples.
Another option is to work additional hours with a side hustle, so you can put away the extra cash into savings or investments.
Research from the Direct Sellers Association of Canada found that two in five Canadians pursued a side hustle in 2022 - with inflation being a big motivating factor.
If you are unsure where to start, consider using your existing skills to bring in more income. Online marketplaces for freelance services like Fiverr can help you find those looking for your skills and talent.
Another simple way to bring in cash is by renting out a property you own or reselling items on eBay or Amazon. Instead of selling your things, you can also earn cash back, and even $10 for free, by joining rewards apps like Ampli.
