6 steps to saving for your goals
Whether your dreams are big or small, you’ll need to build up the necessary funds to make them a reality. It’s never too early or too late to invest. It’s all about setting goals and being disciplined. Here are the key steps to get you there.
1. Set your goals
To achieve your dreams, you have to invest time and money. Whether you’re working on the itinerary for your next trip, designing a new kitchen or making plans for retirement, you need to set goals and give yourself time to achieve them. Regardless of what kind of dreams you have, the best way to make them happen is to start early and work gradually toward it.
2. Figure out your timeline
Set a realistic timeline and stick to it. To make it easier to save, think about making your contributions via preauthorized debit. You can transfer money from your bank account to your savings account and decide the amount and frequency of your contributions to help you reach your objectives. That way, your savings will be automatically built into your monthly budget.
3. Make a budget
You’ll need to determine how much you need to save for your goal and how you’re going to do it. But first you need to know where your money is going. Make sure you know your fixed and variable expenses and set up a budget. Reduce nonessential expenses and put that money aside.
Did you receive a bonus at work? A gift from your family? A big tax refund? Consider putting this money into your savings to help you achieve your goals even faster. Whatever you’re saving for, it’s important to save on a regular basis and make sure you have control of your finances.
4. Grow your money
Are you an organized saver and already have a savings strategy in place to achieve your goals, but you’re asking yourself what more you can do to grow your money? There are many investment products and services available. But how do you choose the right one?
Here are a few options:
TFSA
Choosing a tax-free savings account (TFSA) will help you grow money, that otherwise would have just sat in your piggy bank, without having to pay taxes on it.
You can use the funds you save whenever you want, for whatever purposes you choose or you can use it as an emergency fund to prepare for the unexpected. The contribution limit is not dependent on your income; you can contribute to a TFSA up to the maximum amount set by the government.
RRSP
Opening a registered retirement savings plan (RRSP) will help you grow your money for retirement tax-free. The contribution limit for your RRSP each year will depend on your income.
Contributions to your RRSP are deducted from your taxable income and you can, depending on your situation, receive significant tax refunds. Contributions are taxable only when you take them out of the RRSP, in other words, when you retire.
FHSA
An FHSA is a tax-free savings account designed to help future homeowners save for the purchase of a qualifying first home in Canada.
Combining the advantages of an RRSP and a TFSA, the FHSA gives you a deduction that reduces your annual taxable income and allows you to generate tax-free returns.
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5. Reassess your situation and take action
If your situation has changed, or if you expect to fall short of your goals, it’s time to readjust your savings plan and timeline. Once you’ve raised the necessary funds and met your initial objectives, it’s time to make your dreams happen.
6. Make it happen
It’s time! This is it, the moment you’ve been waiting for! It’s time to head out on your trip… get married… renovate your kitchen… or start your well-deserved retirement. Enjoy!
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Whatever product you’re interested in, the following tools will give you an idea of how much to invest, which you can then discuss with your advisor.