Toronto ON – There are only 15 days left to make a contribution to a Registered Retirement Savings Plan for the 2011 tax year. However, according to the Royal Bank of Canada’s Annual RSP Poll, 60 per cent of younger Canadians (18 to 34) do not have a financial plan, compared to nearly the same number of older Canadians (55 to 69) who do have a plan.
If you have a financial plan and no debt then there’s no problem. But if you don’t have any financial goals and are carrying debt, is it wise to contribute to an RRSP? Moreover, for younger Canadians struggling to pay off student loans or credit cards, is it better to concentrate on reducing debt, saving for the future, or both?
“Younger Canadians need to be focusing on a plan to reduce their debt and save for their future,” says Jeffrey Schwartz, executive director, Consolidated Credit Counseling Services of Canada, Inc. “Being raised with the ‘I see it, I like it, I’m buying it’ sense of entitlement has hindered the savings capacity of younger generations.”
For Canadians who are not thinking about their future, to have a successful financial plan will require shifting attitudes and changing behaviours towards money. Recognizing that income is a finite amount of money each month is the first step. “The plan, which is really a nice word for budget, is about living within your means and including both paying down debt and saving for the future as expenses,” continues Schwartz.
Need help developing your financial plan? Consolidated Credit offers these suggestions to get you started:
- Determine what your financial goal looks like: Is it a house, saving for your retirement, paying down debt, or even an engagement ring?
- Review your monthly spending from 2011: Gather receipts and monthly statements, organize them into fixed (rent or car payment), flexible (gas, groceries or utilities) and discretionary (entertainment, vacation, gym membership) and total each area and compare them to your income.
- For 2012, take your expenses and add paying down debt and your saving’s goal to them. Then, subtract the total amount from your income. The goal is not have any money leftover, but to be merciless about reducing your expenses so you can reduce your debt and increase your savings.
- Put your credit cards on ice and use cash or debit to guarantee not to increase your debt load.