Posted on Wednesday November 15, 2023

The knowledge you need to manage your family's finances

Does it feel like your accountant is speaking a foreign language? Perhaps it’s time to review some key financial concepts. Deepening your knowledge of personal finance will help you make ends meet with less stress and help you stay in control of your financial situation. 

In this article, we’ll take a look at the vocabulary of personal finance management and guide you towards tools that can help you see things more clearly. Ready? Let’s go! 

Budgeting: there’s no escaping it! 

Budgeting is an essential part of financial health, but it often makes people cringe. It’s so important, though! In a 2019 study, around 1 in 6 Canadians (17%) reported monthly expenses that exceeded their income. 

*Source: Study conducted in August 2023 by Chartered Professional Accountants of Canada (CPA Canada) 

Could a better understanding of what goes into a budget improve the way we manage our finances? We think so. 

Income: beyond salary 

A detailed budget is useful at every stage of life, and it’s never too early to start! Begin by getting a clear picture of your income: 

• Employment income: Whether you’re an employee or work for yourself, you probably generate most of your income by the sweat of your brow! 
• Passive income: Have you ever thought about buying an apartment building? Rental income is included in this section, as well as interest earned on your investments. 
• Government benefits: Family benefits, GST/HST tax credits, employment insurance, pension payments… Governments set up a wide range of programs from which you can earn income. 

Expense control: the key to success 

While some expenses are constant, others are unpredictable and outside of our control. But we can’t forget about them when we’re preparing our budget. 

Expenses are generally classified into 3 categories: 

• Fixed and recurring: Such as your rent or mortgage, electricity and telecommunications bills, car loan payments, and insurance. 
• Variable and recurring: For example, groceries, healthcare (pharmacy, dentist), tuition, and subscriptions. 
• Discretionary (including unforeseen events): These are your little splurges, outings to restaurants or cinemas, trips, gifts, hobbies, and so on. But discretionary spending can also include a broken computer that needs to be replaced. 

If you monitor your budget, you’ll be happy to see that your income exceeds your expenses! Placed in an emergency fund or as an investment, the resulting surplus will help you generate passive income for the future. 

Talking honestly about money 

The health of your personal finances depends on saving, but good financial planning, tailored to your specific needs, requires the help of an experienced advisor. To get a plan that’s right for you, you first have to break the taboo surrounding money. When it comes to financial planning, there’s no room for secrecy! 

Investments: just a bunch of gibberish? 

There are a variety of investment options, depending on your risk profile. To find out more, make an appointment with a UNI advisor. At your first meeting, you’ll fill out a questionnaire to determine your risk tolerance and the purpose of your investments (down payment on a house, children’s education, travel, retirement). Your advisor will then guide you towards investments that are best suited to your situation. 

Tax-saving investments 

Using RRSPs, RESPs, and TFSAs wisely can significantly reduce your tax bill and help your investments grow faster. 

• Registered Education Savings Plan (RESP): The major advantage of this program is the government subsidies, which are added to your contribution. And your savings grow tax-free. 
• Registered Retirement Savings Plan (RRSP): Everyone needs to save for retirement. The RRSP offers the advantage of a tax deduction for the current year, plus the possibility of conversion through the HBP program if you’re about to buy your first property. 
• Tax-Free Savings Account (TFSA):This flexible option is ideal for your savings, since the interest generated is not taxed. However, there are a few rules to follow. 
• First Home Savings Account (FHSA): Planning on buying your first house? The FHSA allows you to save tax-free. As with an RRSP, contributions are tax-deductible and investment earnings accumulate tax-free. And like the TFSA, withdrawals from the FHSA are tax-free.  

Financial literacy for young people 

Financial education should start as early as possible. From an early age, children are able to understand that in return for something they need or want, they have to pay a certain amount. Your role as a parent is to teach them the difference between a need and a want. Encourage them to ask themselves these questions: will this toy really be used? When? How? Are there other, less expensive options? 
 
UNI offers a range of tools to help young people acquire the knowledge and good habits that will stay with them for the rest of their lives. Among these tools is the Youth Starter Account, an educational activity offered from kindergarten to Grade 8 in partnership with schools. 

Financial literacy is for everyone, for life 

Financial Literacy Month is the perfect opportunity to learn all about personal finance. A number of free resources are available to help you learn more, including financial literacy lessons offered by CPA Canada (Chartered Professional Accountants Canada). 

Everyone, regardless of age, work, or family situation, is affected by financial issues. Mastering the basics of savings and financial planning will help you accelerate your career path and ensure your family’s security. 

Please don’t hesitate to contact us by phone or email; we’ll always be able to answer your questions and help you understand your finances.