4 Things to do to Stay in Control of Your Finances

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Here are four things to do to stay in control of your finances, plan your future and overcome life's unexpected events.

1. Make a budget

Make a budget to balance your income and expenses. This is a good way to reduce stress because you will know how much money you need to live the way you want to.

How do you make a budget? There are various tools available to help you do so. Our budget management tool  is easy to use and and you can save your budget or print it. If you prefer a more interactive tool, try the Government of Canada's budget planner .

Generally, you must determine your available income, that is, what is left after taxes and social contributions. You must also determine your fixed and variable expenses. Then, by calculating your income less your expenses, you will see if you have money left over to save, finance your projects, or build your emergency fund!

Once your budget is made, be sure to respect it. Review it if a change occurs in your life, for example, a large unexpected expense or, on the contrary, a salary increase. When you have a higher income, it is tempting to increase your standard of living without considering saving more, but this is the best time to do so.

2. Plan for automatic savings

Plan for automatic savings in your budget. It is important to give yourself some financial freedom, even if it is a small amount! You program it once, and it is done for a long time. You will save without having to think about it and without having to calculate how much you can set aside.

You can increase the amount you save when you get salary increases or unexpected income, such as a year-end bonus or a tax refund. The goal is to finance your projects without having to take out loans that would cost you a lot in interest.

3. Build an emergency fund

Essential and unexpected expenses are part of life, but they can be expensive! So, if you also have to go into debt to pay for car repairs or an urgent visit to the dentist, it will cost you even more because of the interest you will pay.

Having an emergency fund is like having a safety net that limits damage. Therefore, once you have set up your automatic savings, use them first to build up your emergency fund. Invest the money where it will be easy to withdraw quickly, such as a savings account.

Save slowly but surely to set aside the equivalent of three to six months of your net salary. Yes, saving three to six months of your salary may seem like a lot, but go at your own pace. It is okay if it takes several years to get there, and the amount you need to save also depends on your situation. For example, an emergency fund that equals to three months of your salary would be reasonable if you have a stable job or if your family can count on multiple sources of income. However, if you only have one source of income and your job is less stable, it would be better to set aside the equivalent of six months of your salary.

4. Insure your salary

Insure your salary! Your biggest financial risk is losing your salary. It is impossible to predict an illness or an accident, but you can protect yourself in case it happens and prevents you from working. For example, if you get a concussion and have to stop working for several weeks. This is called disability insurance or salary insurance.

Check with your employer: your group insurance may offer disability insurance or salary insurance. Depending on your coverage, if your salary increases, you may need to increase the amount of your insurance as well. Stay informed: it is really in your best interest.

Critical illness insurance

Would you like to protect yourself with critical illness insurance ? Critical illness insurance can entitle you to a tax-free amount if you have a specific illness, such as cancer, a heart attack, or a stroke. The insurance contract specifies which illnesses are covered and defines them. The amount received can be used to pay for expenses incurred as a result of the illness, such as receiving care at home and adapting a vehicle, or even to allow your spouse to stop working to be by your side. In any case, verify what your insurance covers and whether your disability insurance is sufficient.

Disability pension under the Québec Pension Plan

The Québec Pension Plan, to which you contribute from each pay, offers basic protection in the event of severe and permanent disability, that is, if your medical condition prevents you from doing any work on a full-time basis, forever. It is a basic protection because it does not replace all your salary and it does not cover short-term disabilities, which are more common.