“Lifetime tax reduction—so-called income smoothing—may be the best approach,” Heath said.
50-30-20 budgeting
Fifty percent of the paycheque for needs, 30% for wants and 20% for savings—the popular budgeting strategy doesn’t work anymore, says Morgan of Canadianbudget.ca.
“In today’s environment, it doesn’t fit as well as it maybe used to a decade ago,” she said. “Because of (the) high cost of living (and) high cost of housing in Canada, it’s a bit harder to make things fit into that proportion.”
Morgan added people mistakenly think of budgeting as restrictive—having to cut back on everything, including fun.
“But people don’t think of every company out there in the world that has a budget and they stick to it because it’s a way to use your money that benefits you and helps you reach your goals,” she said.
Morgan suggests following a zero-based budget, which means assigning a “job” to every dollar, even if it is being put aside for savings—and not leaving any dollar unused.
“Even if that means you’re leaving a buffer amount of $200 to protect you, (and) you’re over in a certain category, you’ve given that $200 a job—that job is to protect you,” she said.
Investing is complicated
“So many Canadians hand their money over to the bank, which is then invested in high-fee mutual funds or, even worse, (people) don’t invest at all,” says Morgan.
