Balancing your monthly expenses with your need for long-term savings
Life would definitely be easier if you only had to think about one thing when it comes to your finances. In reality, it can often seem like there are a thousand financial priorities to juggle every day.
Although everyone’s financial circumstances are different, here are a few quick tips to help you balance multiple priorities when saving for your future.
Boring and painstaking as it sounds, there are many benefits to creating a realistic and complete budget. It’s really the only way to know exactly how much you’re spending each month, which then gives you a good idea of what you can save. There are plenty of budgeting sites and apps that can help you get started, including RBC’s myFinanceTracker.
A proper budget is also crucial if you’re hoping to cut back on certain monthly expenses to make it easier to start building a savings plan.
It’s advisable to limit the amount of interest you pay each month. The key here is to focus on paying down your higher-interest debt first, including credit cards and/or unsecured lines of credit. The balances of your secured lines of credit and mortgages can be paid down next.
With a proper budget in place, and a good view of your monthly expenses, you should put aside a bit of leftover cash towards an emergency fund. Then, if you unexpectedly need a car repair that is above what you’d budgeted for, you can use the fund.
We all want to enjoy a comfortable retirement. The key is to make saving for retirement a priority, and regularly invest some of your money toward that long-term goal. Consider setting up a Registered Retirement Savings Plan (RRSP) and contributing regular, smaller amounts each month. With an RRSP, you can reduce your taxable income each year and defer taxes on any growth you achieve while your savings remain in the plan. You may be surprised at how quickly your savings can grow.
Yes, you have monthly expenses that are difficult – if not impossible – to reduce, like your mortgage, taxes, rent, car payments, food, heat, hydro, etc. And yes, it’s important to pay down your debt and create an emergency fund. But it’s also important to reward yourself for responsible behaviour. If you successfully pay down a credit card, treat yourself to dinner out. Just be sure not to put yourself back into debt by treating yourself too often.
This information has been provided by RBC Global Asset Management Inc. (RBC GAM) and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed. Please consult your advisor and read the prospectus of Fund Facts document before investing. There may be commissions, trailing commissions, management fees and expenses associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. RBC Funds, BlueBay Funds and PH&N Funds are offered by RBC Global Asset Management Inc. and distributed through authorized dealers.
® / ™ Trademark(s) of Royal Bank of Canada. Used under licence. © RBC Global Asset Management Inc. 2017
It may not be as hard as you think to set a plan … and stick to it