Financial Planning for Canadians


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In This Article

Nearly 50% of Canadians don’t have any form of financial planning in place – are you a part of that group?

If you are, it’s time to get started! And even if you are, it never hurts to have a small refresher. 

After all, financial planning is key in so many areas of your life. It’s important to help you stay afloat today, but can also majorly impact yours and your loved ones’ futures if you aren’t actively planning where your money is going. 

In this article, we’ll go over what financial planning actually is and dive into three big areas surrounding it: the past, the present, and the future – and what you can (or should!) do in each of these stages to set yourself up financially.

Let’s dive in.

What is Financial Planning?

Financial planning is, simply put, looking at where you are today and where you want to end up. You would take a hard look at your current money situation and, based on that, build out plans to get to where you want to end up. Having a plan like this for your money makes it more likely you’ll succeed (if you fail to plan, you plan to fail!) and is a big part of financial responsibility.

A good financial plan has, well, a plan! You want to take small actionable steps that are reasonable, given your current financial situation. If your plan is completely unattainable, you’re already setting yourself up for failure.

The first step to a good financial plan? Figure out where you’re starting from. 

Evaluate Your Financial Situation Today

Have you ever decided to run a full marathon without considering your skills today? No. You look at where you are and create a training plan to get you there! Cut down on sugar, work out a few times a week, and do a practice run every month. Those are the steps that get you towards that goal.

Good financial planning is a marathon, not a sprint. You’ll want to tackle it the same way and accept these changes for the long haul if you want to see results. You need to evaluate your current financial standing and make a plan based on that. 

Keeping the long term nature of financial planning in mind, looking at joint last to die policies is also a good way to prepare for the inevitable.

But what should you be looking at when you evaluate your current financial situation? Here’s some starting points.

Current Income

To put money towards different financial goals, you need to have money coming in. The first step is to look at what this number is. 

Remember that you don’t want to base this off your salary exactly, but how much actually is deposited into your account monthly. Take a look at a pay stub so you know what is deducted due to taxes, and then use that number to build a budget around.

If you plan thinking you have more coming in than you do, you’ll end up overspending 


Debt has become a normal part of most Canadians’ lives. It can come from a ton of different areas – think credit card payments, car payments, student loans, or even mortgage payments. 

Look at how much debt you currently have across your expenses and total it up. Once you do this, you’ll want to see how much money you’re putting each month into these debt payments.

From there, you can calculate your debt-to-income ratio. This ratio shows you how much debt you have in comparison to your overall income, which is important in gauging your financial health. The industry standard says you want this ratio to be below 30%, but approaching 40-50% worrisome. You would calculate it like this:

Monthly Debt/Monthly Gross Income) x 100 = Debt-to-Ratio Income

Now let’s see what this would look like with numbers. We’ll assume your current income is around $5,500 per month. You have the following monthly debt payments:

  • Student Loan: $75
  • Credit Card: $200
  • Cars: $200
  • Mortgage/Rent: $1,500

This means you have a total of $1,975 a month in debt payments. Here’s how this would look in the formula.

($1,975/$5,500) x 100 = Debt-to-Ratio Income

(0.359) x 100 = Debt-to-Ratio Income

35.9% = Debt-to-Ratio Income

And there you have it! You now know that 35.9% of that monthly income is going towards debt, leaving you with about 65% of your monthly income to cover any other monthly expenses.

The biggest monthly expense you’re likely to face? Your living situation.


How much of your monthly expenses are going towards your home? On average, Canadians spend 35-50% of monthly income on housing. If you already have 35% from our above example being spent on debt, this makes for one tight budget for everything else. 

That’s why evaluating your housing and debt go hand in hand. If you have a ton of debt (i.e. if your mortgage or rent payment is way too high for your current income) you may want to take a hard look at your housing situation. See if you can find something cheaper, and see how that monthly freed up cash can make a huge difference!

Create a Budget

Now that you know what you’re making and where a ton of your money is going, you can work with that framework to create a budget.

Remember – making your budget is one thing, but knowing how to stick to a budget is another. You need to be realistic, and if that means certain things need to compromise that’s okay. You don’t have to pay down your debt in a year if you’re going to be miserable the whole time.

It also helps you succeed when your budget is attainable. If you decide you’re spending no money on takeout ever and decide to get a coffee, you’ll feel defeated. It’s easy to fall off your budget when you’re defeated and feel like there’s no room to live within it. 

Slow and consistent effort is much more important! You’ll be able to spend confidently, knowing it’s budgeted, and still make money moves towards better financial security. Win win!

A person budgets their cash using a notepad, and calculator for PolicyMe

If all of this financial planning seems daunting, there are financial planners who do this as their full time job! And you may be wary of the upfront cost, but it’s a small price to pay for a big return.

Plan for Future Financial Security

It doesn’t matter if you’re starting in major debt – every small step you take towards less wasted money is actually you taking care of your financial future. 

If day to day finances are tough, however, financial security is even harder. It can feel daunting to try to get ahead when you may be struggling to stay where you are. But the importance of financial planning with the future in mind has only been emphasized throughout the coronavirus pandemic.  

And as you work on today’s financial situation, you’ll naturally be working towards tomorrow as well! 

As you do this, here are some areas of a financial secure future you’ll want to consider.

It is also important to ensure you're aware of any potential expenses you may have before establishing your financial plan such as looking into critical illness insurance meaning, seeing if it aligns with what you require and if it does, including it as an expense in your budget.

Buying a Home

For many Canadians, buying a home is a big financial goal. But with how steadily the housing prices keep rising and how big a payment is required up front, that requires some major savings.

And the up-front costs aren’t the only prices you’ll be slammed with as a homeowner. Here are some of the other expenses you can expect once you receive the keys:

  • Property taxes
  • Home maintenance costs (repairs, renovations, etc.)
  • Utility bills 
  • Mortgage payments 

While your down payment will be the largest one time payment you make on your home, the costs will be ongoing! Make sure you keep that in mind for future expenses, because there will always be some costs associated with home ownership. 

Having Kids

Who doesn’t want their own mini-me running around?

And while there’s no denying how cute kids are, there’s also no denying how expensive they are. It’s generally estimated that it costs anywhere between $10,000-$15,000 a year to raise a child in Canada – yikes.

If you know kids are a part of the plan, you’ll want to start putting aside money for them early. Think of the price of supplies you’ll need when they’re little, like diapers and wipes, to the costs of education when they’ve hit 18 years old. 

You’ll want to look into an RESP (registered education saving plan) account early to start saving for the big things, on top of the daily expenses. 

Emergency Funds 

If the last eight months – and ongoing, honestly – have taught Canadians anything, it’s the importance of having emergency funds stashed away.  

On average, professionals recommend having three to six months of living expenses set aside as your “rainy day fund”. This is money that covers your cost of living, assuming that you had no money coming in.

If you’re starting to consider your rainy day fund, here’s what to think about to determine how much you need in the account to keep yourself afloat:

  • Rent: You’ll want to be able to keep a roof over your head
  • Groceries: How much are you spending on groceries each month? Make sure you can afford to eat
  • Hydro/Electricity: Having money aside for hydro and electricity will ensure that you can keep water and electricity on!
  • Cable/Phone Bills: Internet has become even more important as people are working from home, so you may want to ensure you can afford this even during some “rainy day fund” times
  • Debt Payments: Remember debts we talked about earlier? You want to be able to make those payments no matter what. If you miss some, they may get more expensive 

These are just some of the things you’ll want to look at. Consider your lifestyle and if there is anything you need to have no matter what, and adjust your emergency savings plan accordingly. 


After years of working hard, it’s time to kick back and enjoy your retirement! 

But just like you had to plan your budget, this requires some retirement planning. You’ll have had to be saving for retirement over the last few decades, on top of everything else you want to save for.

Here are some quick tips for retirement savings along the way.

  • Know your retirement style: Do you want to travel every year? Retire to a small town and stay put? Knowing your retirement goals will help you know how much you actually need to be putting away
  • Use RRSP company match program: Some companies offer retirement plans, and will match your contributions. This is a great way to save little by little (it can come right off your paycheck, so you aren’t tempted to spend!) and have somebody matching what you save. It can be hugely motivating
  • Save in your RRSPs early: It’s easy to find excuses not to (there’s always another bill or savings plan you can invest in) and retirement planning seems far away. But if you put just a little bit away from your 20s, it becomes a habit. 

Financial Wellness in the Future

Believe it or not, a big part of financial planning includes looking at a future you may not be a part of.

It may sound morbid, but it is a reality you’ll want to think about. 

Look at it this way. If you were to pass away, would your family be able to afford their current lifestyle? Would they be crippled by debts you gathered (before your in-depth financial planning started, of course) or struggle to pay funeral expenses?

When you practice financial wellness, it means these aren’t things you will have to worry about your loved one’s being shouldered with if something were to happen to you. 

Here are two financial planning moves you can make today that ensure your loved ones won’t be crippled with debts tomorrow.

Life Insurance

When it comes to financial planning, one key consideration is protecting your loved ones in case of unexpected events such as illness or death. Canada life insurance no medical can be a great option for those who want coverage but don't want to undergo a medical exam. With this type of insurance, you can obtain coverage quickly and easily, without the need for extensive paperwork or medical documentation.

Life insurance is a small purchase with a big impact. What life insurance does is provide your loved ones with some financial security If you were to pass away. Your life insurance provider would pay out a death benefit to your loved ones in the sum you decided on. 

Now while you’re working on financial planning and budgeting, the idea of putting money into this may not be top of your list. But if you get your life insurance plan early, you can actually lock in a fairly affordable rate for decades to come!

Canadian life insurance cost monthly can be affordable and provide peace of mind knowing that your beneficiaries will receive a tax-free death benefit payout if you were to pass away. Thus, having a term life policy can assist with financial planning.

Term life insurance also offers flexible policy durations. This means you can choose your coverage as needed so you don't pay for years of life insurance you don't need. If you need coverage for 10 years, you can purchase a 10 year term life insurance policy through PolicyMe.

It’s also almost more important to have this in place if you’re still figuring out some financial issues. If something happens, you don’t want to leave your loved ones to pick up the pieces from any financial messes you may have been struggling with. This death benefit can protect your loved ones

To determine what policy or provider is ideal for your situation, visit PolicyMe to see some of the best life insurances in Canada. By using the free online insurance quotes or using our life insurance calculator, you can determine whether or not a term life policy is ideal for you.


Having both life insurance and a will in place is the best way to ensure that your loved ones are completely covered if something happens to you. The two work hand in hand.

While life insurance will provide your family with money to cover the expenses you were contributing to, a Will ensures that all of your belongings are distributed to your loved ones. This includes money, investments, property, and belongings (your estate). 

The great part about a will is, just like life insurance, it’s pretty easy to get started right from the comfort of your own home. With so many businesses moving online, Wills are no exception. There are great online options, like Willful or Epilogue Wills, that can get you set up easily.

Some Final Thoughts on Financial Planning

There’s no doubt about it, financial planning can seem daunting at first. There are a lot of parts to financial planning, and there’s a huge learning curve if you’ve never done it before.

But all good things take time and work! Think of financial planning as an investment into yourself and your loved ones. When you make these efforts, you’ll be able to take care of yourself today and the people you care about most tomorrow.

So what’s keeping you from getting started?

Laura McKay

COO & Co-Founder
About the Author

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