{"id":2875,"date":"2018-04-28T19:00:00","date_gmt":"2018-04-29T00:00:00","guid":{"rendered":"https:\/\/www.rbcwealthmanagement.com\/en-ca\/insights\/6-financial-literacy-principles\/"},"modified":"2023-11-22T15:07:32","modified_gmt":"2023-11-22T20:07:32","slug":"6-financial-literacy-principles","status":"publish","type":"post","link":"https:\/\/www.rbcwealthmanagement.com\/en-ca\/insights\/6-financial-literacy-principles","title":{"rendered":"Six financial literacy principles"},"content":{"rendered":"\n

1. Budget your money<\/h2>\n\n\n\n

\u201cPay yourself first\u201d<\/p>\n\n\n\n

In general, there are four main uses for money: spending, saving, investing and giving away<\/strong>. Finding the right balance among these four categories is essential, and a budget can be a very useful tool to help you accomplish this.<\/p>\n\n\n\n

Get going<\/h3>

An important starting point in creating a budget is thinking about and recording your short- and long-term financial goals (e.g. a new electronic device, vacation, vehicle, house, further education). Doing so will help generate a baseline for mapping out and putting concrete plans in place.<\/p>

Many use this formula in their budgeting<\/h3>

This is the formula to help you achieve money success: income – savings = expenses<\/strong>. In other words, savings should be prioritized and built into your budget plan, and expenses should be planned and paid from the remaining money after savings have been factored in.<\/p> <\/div>

Five key benefits of a detailed budget<\/h4>
  1. Tracks cash in vs. cash out<\/li>
  2. Determines savings needed for short- and long-term goals<\/li>
  3. Helps you manage monthly bills and expenses<\/li>
  4. Prepares for unexpected expenses<\/li>
  5. Decreases likelihood of overspending or unnecessary spending<\/li> <\/ol> <\/div> <\/div> <\/div>\n\n\n\n

    Structure your savings<\/h3>\n\n\n\n

    To help prioritize savings in your budget, consider setting aside a specific amount on a regular basis, such as through a pre-authorized contribution plan where funds are taken from your account on set days and deposited in an investment vehicle or savings plan.<\/p>\n\n\n\n

    In creating a budget, it\u2019s important to include and track: income, savings goals, fixed expenses and flexible expenses (needed and wanted)<\/strong>.<\/p>\n\n\n\n

    For a budget to be most effective, it\u2019s important to factor in all lifestyle expenses and other financial components, and ensure they\u2019re logged appropriately. <\/p>\n\n\n\n

    2. Taxation\u2014it\u2019s not all yours<\/h2>\n\n\n\n

    \u201cUnderstand your true earnings and how they are taxed\u201d<\/p>\n\n\n\n

    In general, there are four main sources of income: employment, investments, inheritance and unexpected<\/strong> (such as a lottery win). Each of these sources may be taxed in different ways and at different levels.<\/p>\n\n\n\n

    Canada’s federal tax rates are based on income level. You can find the current and previous income tax rates for individuals on the Government of Canada website <\/a>.<\/p>\n\n\n\n

    It\u2019s important to distinguish between marginal tax rates<\/strong> and average tax rates<\/strong>. Your marginal tax rate is the rate of income tax that you will pay on your next dollar of income earned. Your average tax rate is calculated considering your total income tax payable as compared with your total income. Further to federal tax rates, there are also varying provincial and territorial tax rates.<\/p>\n\n\n\n

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    Tax by income type<\/h3>\n\n\n\n