Advice for your personal finances

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- You asked: “How do I make a personal budget?”

[rythmic music]

I’ll explain faster than I can do 20 push-ups.

A budget can help anyone understand their spending habits, avoid debt, prepare for emergencies and reach their financial goals.

- One!

- Finding a tool that helps you organize your budget can be a big help.

It can be anything from an Excel spreadsheet to an app that you download on your phone.

- Two!

- Identify all your sources of income.

Use your bank statement to identify precisely how much money you make.

You could add up all your deposits and that’ll tell you how much you have coming in every month.

Don’t be lazy!

Sorry, I’m talking to myself.

- Three!

- A good personal budget Includes three spending categories.

Fixed expenses, that’s like your rent or your phone bill.

Variable expenses.

That’s groceries, or restaurants or shopping.

And infrequent or annual expenses like insurance, or your driver’s licence renewal and your annual ski pass.

- Four!

- Experts typically recommend putting 10% to 20% of your gross income towards savings.

Now I know, I know.

That might be painful at first, but no pain no gain!

- Easy for you to say.

Five!

- When you deduct expenses from income, you’ll find out if you’re at a deficit or not.

If you are, you might need to make a few cuts to your budget.

Maybe you’re like me and you spend way too much on stylish activewear.

[rythmic music]

If you have a deficit, it’s easier to cut down on variable expenses like restaurants or shopping.

But if you have any money left over – you can pay off some debt or put some into savings in case an emergency comes up.

Now that you know how to do it, stay on top by keeping track of your budget month to month.

It’s all part of getting into great shape... financially.

I think I’m done. How about you?

- Only one left!

- You wish.

- Are you wondering how to pay off your debt?

[rythmic music]

I'll explain in less time than it takes me to do a sun salutation.

All twelve poses.

- Tsk tsk.

We don't say poses.

We say asanas.

[sighing]

All twelve asanas.

[bell dings]

- Credit card, line of credit, student loan, car loan…

If you want to pay off or reduce your debt, we have tons of tips and tricks to get you there.

All you have to do is take it step by step and reduce your debt…

- And your stress.

- You are causing me stress.

[exhaling]

- First Asana, Mountain.

- Even if you have a mountain of debt, breathe gently through your nose...

[inhaling]

...and make a list of all your debts, including the amount, minimum monthly payments and interest rate.

- Second Asana.

- You don't have to announce every single po-- Asana.

The second step is to make a plan, over a year, for example.

That will allow you to evaluate how much you should pay back per month in order to achieve...

- Nirvana!

- Your debt with the highest interest rate should be paid off first because it costs you more.

You have different kinds of debt with the same interest rate?

Pay off the smallest one first.

It'll be gone sooner and that's...

- Relaxing!

- Relaxing.

Above all: always make your minimum payments, every month, for all your debts.

Your credit score will thank you.

- Third Asana!

- Now you're really stressing me out.

Make a budget to see where you can cut your spending.

If your budget is tight, change your spending habits.

You can repair your broken devices, become a bargain hunter, buy used.

You can also consolidate your debt.

That means asking your bank for a loan to bring all of your debt together into one monthly payment, often at a lower interest rate.

Talk to an advisor about it.

Even if you reimburse all your debt, try to put some money aside for emergencies.

Then, you can think about saving and investing.

And even once your debt is under control, it's important not to create more.

[waves crashing]

[bell dings]

I won!

- It wasn't a competition.

- It was, literally, a competition!

Let's go.

- Nah. I'mma stay.

[bell dings]

- You asked:

“How can I save my money?”

[rythmic music]

I’m going to explain faster than I can make a balloon animal.

If you have debts, you want to take care of those first. Pay off the ones that cost the most, that means the ones with the highest interest rates.

You want to take care of those before they blow up.

To save, you need a savings account.

Huh!... The word savings is in the name.

[both]

- Convenient

- Let me explain the difference between savings and investments.

Savings is money that you put aside.

Investments are savings that you want to help grow.

Saving is a habit.

Start with a little every month, even twenty-five dollars is a start.

But be consistent.

That way at the end of the year when you check your account you’ll be like:

“OMG, who put three hundred dollars there?”

[both]

- Oh, wait. That was us.

- Systematic Savings.

Discipline not your strong suit?

It’s ok. Systematic savings can really help.

It’s a service offered by your bank to put money in your savings account automatically.

You set it up online and then the amount you select is put aside at a frequency you decide.

You just set it up and forget about it.

- That’s great because I’m good at forgetting.

- Yeah, I thought so.

It’s important to have a safety net in case of unexpected expenses.

That should be your top priority.

Like, for example, your fridge breaks down.

You want to be able to replace it without completely ruining your budget.

Now I don’t want to burst anyone’s bubble...

[balloon burst]

Uh, but ideally you want to have 3 to 6 months of expenses saved up.

And you know what they say, the bigger the cushion, the better the...

- Sofa!

- And you want to be comfortable in case of any unexpected expenses.

Why don’t we check on that balloon animal.

Oh, a snake! Very ambitious.

[rythmic music]

- Are you wondering how taxes work?

I’ll explain in less time than it takes to run a kilometre on a treadmill.

- We’re more likely to be running to an online sale...

- Taxes. The money you give the government to help pay for collective services, like schools, hospitals and roads.

Each time you get paid, your employer keeps part of your salary, instead of you paying a huge amount at the end of the year.

Go take a look at your pay stub.

Your annual income is made up of your salary but also any other income you receive, like student loans or interest earned on investments.

- “New…life…day…one.”

- Your taxable income is the part of your annual income on which you pay taxes.

Tax rate is the percentage of your income that you have to pay in taxes.

The rate can change and is different at the provincial and federal levels.

- Is a kilometre the same length all over the country?

- Yep!

- The more money you make, the more taxes you pay.

Because taxation works in brackets.

- Just like a treadmill.

- Yeah, let’s say your income is $65,000, you might pay 15% on the first $50,000 and 20% on the next $15,000.

In the end, you haven’t paid 15% or 20% but a combination of both, which is what we call your effective tax rate.

- Can we bring the treadmill back down to 0%, please?

- There are ways to pay less tax, like putting money into an RRSP, or deducting the interest on your student loan.

Find out more from your financial advisor.

- I think I ran 2 kilometres!?

- Zero point two kilometres.