Overview
Newcomers face numerous obstacles in Canada. Between the unfamiliar culture and financial system and the cost-of-living crisis, many struggle to achieve a good financial outcome. In this article, we will explore 10 smart financial strategies to help newcomers thrive.
Strategy #1: Create a Budget
Given the high cost of living, a sound budget should be top of mind for everyone. A good budget allows you to cover expenses comfortably while saving and investing. To develop a budget, evaluate your monthly income, fixed expenses, and variable expenses. See whether you have an opportunity to reduce your unnecessary spending and/or increase your income (see strategy #2). Determine what percentage of your income you can allocate toward fixed expenses, variable expenses, and savings/investments. Having a positive monthly cashflow is essential to achieving financial security over time.
Even a small amount of weekly or monthly savings will accumulate. If you could allocate up to 20% of your income to savings and investments, it would set a great pace for your financial growth and development. Make sure you allocate your income deliberately and strategically, rather than impulsively.
Strategy #2: Increase Your Income
It is a well-known fact that inflation has outpaced wage growth in recent years. The minimum wage does not match the living wage in most places throughout Canada, making it difficult to afford a decent lifestyle on a low or modest income. Therefore, asking for a raise at your current job, earning a promotion, or retraining for a more lucrative career could be an important step to increasing your income and achieving financial stability.
There are many lucrative career paths in finance, technology, and healthcare, for instance. Not all tech jobs involve coding – some require project management skills, for example. Skilled trades may offer high compensation due to the relative lack of qualified experts e.g. electricians and plumbers. Navigating the job market with conscious and deliberate strategic awareness is likely to yield a better outcome.
Strategy #3: Manage Your Housing Costs
Canada is undergoing a dramatic housing crisis. Even though many condominiums are projected to be completed in 2025 in Toronto, for instance, rental prices are likely to remain high. The living wage, especially in major urban centres like Toronto and Vancouver, greatly exceeds the minimum wage throughout the country, so even two full-time minimum-wage workers may struggle to afford rent or a mortgage.
Therefore, to save on housing costs, you may wish to consider shared accommodations or other, more affordable housing options. If you cannot afford to rent a one-bedroom apartment by yourself, for instance, living with roommates or housemates could help reduce your expenses. Similarly, if a house is too expensive for you to purchase, given the stringent mortgage requirements, a rental may be the better option.
Strategy #4: Pay Your Bills on Time
Paying your bills on time is a crucial step toward building your creditworthiness. If you demonstrate a history of consistent and timely payments, you may obtain access to higher-quality financial products and services as well as being more likely to qualify for a rental or a mortgage. Automating your bill payments could help ensure you never miss a due date.
Strategy #5: Open a Credit Card
A credit card is a revolving type of credit, which means you can borrow funds on a recurring basis, within a given limit. Opening a new credit card and paying off your balance every month may help you build a solid credit history. This may increase the range of financial products and services available to you, on more favourable terms.
Strategy #6: Lower Your Credit Utilization Ratio
A credit utilization ratio above 30% is considered high. If you consistently utilize more than 30% of your available credit limit, it may negatively impact your credit score. Therefore, maintaining a credit utilization ratio below 30% could help improve your credit score while ensuring that you are not financially overextended. An excessive credit utilization ratio is typically an indication that your financial obligations exceed your capacity, so it may be a sign that your cashflow or budget needs significant adjustments.
Strategy #7: Consider Thrift Shopping
There are many thrift stores throughout Canada that offer potentially useful items at a much lower price. Thrift shopping could help you sidestep higher prices while obtaining items that may benefit your household e.g. kitchen appliances, electronics, clothing, books, and more. Before you go to the mall, consider thrift shopping. Popular thrift stores in Canada include Value Village, the Salvation Army Thrift Store, and more.
Strategy #8: Consider Public Transit
A car is expensive to maintain and usually involves many recurring expenses. These may range from gasoline to car repairs, from car insurance to car payments. If your budget doesn’t allow you to maintain a car, you may wish to use public transit instead. In major metropolitan centres like Toronto, public transit may be well-developed, accessible, and comparatively affordable while allowing you to travel from your home to your workplace without excessive problems or issues. In sum, public transit may be a better option than owning a car.
Strategy #9: Eliminate Unnecessary Subscriptions
Do you have unused subscriptions? Many digital subscriptions are exorbitantly expensive and could be draining your finances without your even noticing it. Make sure to unsubscribe from any services you’re not using. Unless the subscription service is delivering clear value to your life, it may be time to spend your money elsewhere. You could even free up those funds for savings or debt repayment.
Strategy #10: Build an Emergency Fund
An emergency fund is a crucial tool to help you deal with unexpected setbacks like a job loss, car repairs, or a medical bill. According to Statistics Canada, as many as one in four Canadians cannot cover an unexpected expense of $500. Ideally, you would save up at least three to six months’ equivalent of expenses. Start with a small amount of weekly or monthly savings and build from there. For example, $100 saved per month would result in $1,200 of savings in a year’s time. That would already constitute a solid start to your emergency fund – but will require careful budgeting over an extended period.
Conclusion
The above strategies may help newcomers navigate the financial landscape in Canada. If, at any point, you are struggling to cover urgent expenses, you may wish to apply for a personal loan via LendProConnect. We don’t perform credit checks during the simple and quick online application process. This may enable subprime and near-prime borrowers to qualify for much-needed financial assistance. To improve your credit score, you may wish to sign up for Credit Verify, as this advanced modern technology platform allows you to monitor your credit score and automatically catch mistakes on your credit report.
