Best budgeting tips for newcomers to Canada to help your money last longer while you’re trying to find a job.
I’ve mentioned a few times that one of the fastest things to disappear as a newcomer to Canada is your money. Seriously.
You take a breath in the morning and you’ve spent $100 before even taking a shower.
Your top priority in the early days becomes keeping your money in your account as much as possible before you start generating additional income.
I have compiled some of the best budgeting tips for newcomers to Canada into this. Most of these activities should be conducted ASAP once you land in Canada and get a roof over your head.
Budgeting Tips for Newcomers to Canada
1. Create a Budget
You must create a budget. The best way to keep track of your money and control your spending is by recording every little expense down to the last cent.
This is not an activity that comes easy to most people but unless you’re a millionaire, you should create a budget when you arrive if you didn’t have one before.
I just adapted the one I had in Dubai for Canada. You can download free budget templates in the resources library by entering your details HERE.
They are simple and you can adapt them however you like. By the way, I’m sure millionaires budget too or they wouldn’t be millionaires.
2. Watch Food Spending
Be very careful about the money spent on food in the initial days. It can be quite shocking when you tally up the bill at the end of every week especially if you don’t start cooking immediately.
While the budget will help you track food spending properly, you need innovative ways to save on grocery bills.
Not every supermarket or grocery store is created equal. I shared the best apps for saving on groceries in These 10 Apps Are a Must for Newcomers to Canada.
3. Open a Bank Account
I did this my second week in Canada. Before I arrived, I already researched all the banks and decided on 2. Why 2?
I like keeping personal and business income separate. Some of the considerations when it comes to choosing a bank include:
- Proximity of branches and ATMs to where you live
- Monthly fees. I was only interested in free banking, which is provided by most banks to newcomers. This is usually known as a Newcomer Package.
- Additional fees not included in the Newcomer Package
- Monthly fees after the free period expired
- Unsecured credit card so you can start building your credit history, not for shopping sprees
There are 5 major banks in Canada – Bank of Montreal (BMO), Scotiabank, CIBC, Royal Bank of Canada, and TD Bank.
There are also many other smaller banks and credit unions like Tangerine Bank and Simplii Financial.
4. Start Investing – TFSA and RRSP
One of the things I did within a few weeks of landing was open a TFSA (Tax-Free Savings Account) and an RRSP (Registered Retirement Savings Plan).
These are two of the vehicles the government has set up to help residents invest their money long-term without having to pay taxes.
There is a limit every year for each of the accounts. For the TFSA, the limit for 2019 was $6,000.
You may not be able to invest all of that money at once but open a TFSA and fund it as soon as you can. Remember the power of compound interest?
The good news is if you don’t reach the contribution limit in one year, you can make up for it the next year.
For instance, if you were only able to invest $3,000 in one year, you can invest the balance of $3,000 the next year plus the $6,000 for that year.
You can withdraw the money whenever you want (tax-free). However, it’s recommended to leave it. You can save emergency funds in a different account.
The RRSP (Registered Retirement Savings Plan) is slightly different from a TFSA and has higher contribution limits.
However, the amount you can contribute is 18% of your income from any given year to a maximum of CAD 27,830.
Like the Tax-Free Savings Account, you can carry the amount into future years if not maxed out in any year.
However, withdrawals from an RRSP are taxed. The purpose of an RRSP is long-term investment until you retire so you really shouldn’t be withdrawing money from this account.
My investment portfolio is housed with Questrade where I DIY it although I have a financial advisor I talk to every few months. Fees are minimal and I can keep track of everything.
You can learn more about Questrade, open an account and get $50 in free trades HERE.
You cannot activate an investment account with Questrade before you become a Canadian resident as a PR card and passport copy is required.
You may not be so hands-on with investing but before you hand over the reins of your money to someone else, I highly recommend reading one or all of the following books:-
Moolala Why Smart People Do Dumb Things with Their Money (and What You Can Do About It) by Bruce Sellery
5. Avoid Pay Day Loans
Payday loans are the devil. A payday loan is a short-term loan that you pay back once you receive your next paycheque.
This might all sound nice and neat but the interest rates are a killer. You will end up paying over 300% interest or more depending on how much you borrow.
And what if you can’t pay back? Well, that’s even more interest. And if you definitely can’t pay?
I don’t know about Canada but there are places where they threaten you or your family and go as far as harming you.
Yes, money being tight is scary. Been there, done that, starved a little bit through it.
Whatever you do, no matter how desperate you are, never ever take out a payday loan. It’s predatory and will pull you into cyclical debt you may never get out of.
6. Got Kids? Apply for the Canada Child Benefit
If you have kids, you can apply for the Canada Child Benefit, a tax-free amount paid to you monthly for each child under the age of 18.
This can be immensely beneficial in the early days. When you land at the airport, there’s a counter where they give you a to-do list, which includes a part about claiming your benefits.
If possible, be sure to apply for your SIN before leaving the airport. It takes less than 30 minutes at the Service Canada counter. More on Canada Child Benefit HERE.
7. Purchase Insurance
In Ontario, your health benefits don’t kick in until you’ve been here for 90 days. It is very very expensive to have a medical crisis when you don’t have insurance.
Purchase medical insurance coverage for the first 90 days and once your health benefits kick in, purchase insurance for supplementary services like dental, drugs, vision, etc.
I bought my initial medical insurance from Arbetov Insurance. After 3 months, I purchased supplementary insurance through my professional association for writers once my provincial benefits kicked in.
Update – as of 2020, you can apply for OHIP as soon as you land in Canada so that’s good.
These tips are not exhaustive but they are a good place to start especially in the first few months where there are a million and one things going on.
I will expand on the tips with another article later on or just add on to this one. Be sure to subscribe below if you want to receive updates on new articles.
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