Okay so I took the advice I had been reading about automating your finances from I will teach you to be rich and modified them slightly to work with my situation and The Canadian banking/saving systems.

Well as things are different on this side of the border, as with all things there are slightly different ways of doing things. I have direct deposit already set up, which is pretty much standard here in Canada as far as I know from personal experience. Now here is where things change up a little, unlike the US here in Canada you don’t really have any free Checking account options with the banks or credit unions they all charge a fee depending on the amount of transaction you do per month (note there are some banks but as with most things in Canada not available in Quebec).
So What I have done is taken the account we have and opened a second checking account with another bank. The beauty and reasoning behind this is that the other bank has lower fees, and I can have my RRSP deduction done pre-tax without any fee, as where with the “bank A” there would be a fee to do this and the service is much better with bank B.
So at this point this is where we are:
- Checking Account with Bank A
- Checking Account with Bank B
Now The way things are Set up I opened up an RRSP Account with Bank B. once I have that set up I give that info to my employer and tell them how much I want deducted from my “PRE-TAX” Pay into my RRSP Account (for those in the US this is the same as a 401K).
So for my scenario I am looking at taking 10% of my Gross or “Pre-Tax” Salary and have that deducted and put into my RRSP account. Note: here in Canada it is a little different than in the US as there is a maximum amount you can deposit into your RRSP which is calculated each year when you do your income tax return, but the amount is cumulative, so if you have not used your previous room it carries forward each year.
The Beauty of this is your literally getting free money, because there is no tax taken off the funds so they work for you immediately and at full value. Also I find that the impact to your overall “After-Tax” Salary is not that much, in my case I only see about a 9% difference in the total amount I get after all the deductions are done, but I am saving 16% of my “after tax” salary so in essence I am getting almost 7% extra by saving in my RRSP Account.
So Now for the rest of my system, at Bank A I have a portion of my Salary deposited into this account and this is my fixed expenses that can’t be paid through a Credit Card(to get points) such as rent and some utilities that only take direct payment. so the key here is I know how much my rent is each month and how much the utilities are, this does not fluctuate. I have an amount transferred to cover those bills into this account. and I don’t touch it. I have my cheques written and mail them on the due date for the rent and I have my payment scheduled to be taken from this account on the due dates and this takes care of the expenses and no worries, no headaches. I just check to make sure things have passed as scheduled and the balance is sufficient (usually once a week as my landlord usually takes a while to cash the cheques for some strange reason).
now to Bank B, this is where the rest of my salary gets deposited and this is where the magic happens. So from here I have an automatic transfer to my ING Tax Free Savings Account, now this is something similar to a cash ISA as they have in the UK but in Canada it is relatively new, long story short the Government introduced the (TFSA) In 2008 to Compliment the RRSP and RESP, you can get all the details at www.tfsa.gc.ca now the great thing about TFSA is income earned as well as any withdrawls are tax free.
- So I have my transfer into my ING account happens automatically the day after my direct deposit goes in, this happens Bi-weekly.
- Next we have the Credit card Payment scheduled I usually schedule 2 payment as I get paid bi-weekly.
- then anything left over in this account is spending money.
Now all the other bills I get, which are not that many get handled with the credit card, Cell Phone, Internet, etc..
And in Addition to this I have an automatic purchase plan for my RRSP Account to buy different funds on a monthly basis. so this gives me the benefits of spreading out my investments and making smaller purchases of the funds I am interested in as usually the minimum purchase is anywhere between $500-1000, but with the Automatic purchase plan the minimum monthly purchase amount is $100.




















