There’s more to setting up your newlywed nest than just completing your registry list! Your suitcases are unpacked and your wedding gifts are unwrapped, so what’s next? It’s time to start planning for your future and that means getting your finances in order.
Tackle Debt
You don't want to start your life together drowning in debt, so it's important to approach the subject head on. Be honest with each other about what you owe (old student loans, anyone?) and come up with a plan together. Consider consolidating your debt. Try to get rid of high-interest credit cards by transferring to a low-interest credit card or line of credit.
Start Saving
Once you've come up with a plan to pay off your debts, you have to come up with a plan to pay yourselves by investing in your future. Here are four things you may want to consider saving for:
1) Home: If you currently rent your home—but would love to own someday—start socking away some savings. Look into opening a high-interest savings account with automatic withdrawals—that way you won't forget to set the money aside (and you probably won't even notice it's gone!). If you already own your home, now's the time to consider the pros and cons of variable (payments vary based on interest fluctuations) vs. fixed rate (payments are set in advance and never change from month to month) mortgages. Meet with a financial adviser to determine which type of mortgage is best for you.
2) Children: Are children part of your long-term plan? Consider the cost of raising a child and the loss of income that is likely to result from maternity/paternity leave. One of the biggest expenses for a child is education. As soon as your child is born (and has a Social Insurance Number), open a Registered Education Savings Plan (RESP) to start saving money. An RESP can consist of basic savings, Guaranteed Investment Certificates (GICs) or mutual funds, and the money can be accessed as soon as your child is enrolled in a post-secondary course of study.
3) Emergencies: We all like to think that nothing will ever go wrong, but the truth is that none of us can predict what the future will bring. It pays to have some extra money set aside in case of accidents, job loss or emergency repairs. Three months of living expenses is a good amount to aim for, but ultimately, you have to decide on a number that works for you. Make sure this money is not easily accessible—it’s there for a rainy day (not a trip to sunny Mexico!).
4) Retirement: You and your mister have probably already discussed growing old and grey together, and to make sure your golden years are as enjoyable as possible, you need to start saving today. A Registered Retirement Savings Plan (RRSP) is definitely your best bet. The money in your RRSP isn't taxed until it is withdrawn, and your contributions are tax deductible. Furthermore, a Spousal RRSP (as opposed to an individual RRSP) will reduce your tax burden if one of you makes more money than the other.
TD Canada Trust can help you make the most of your finances. Together. Learn more.
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