For many of us, our understanding of personal finance is deeply rooted in our upbringing. Some had the privilege of financial discussions being a regular feature at the dinner table - "Pass the chicken, and have you started saving for retirement?" For others, financial education came in fragments through trial and error, perhaps non-existent.
You've taken the brave step of building a new life in Canada - congratulations! As you navigate the immigration system, it's equally important to master your money mindset and the Canadian financial system. So, let's explore!
The Psychology of Money: What Is It? Why Should You Care?
Your relationship with money isn't just about how many loonies you can save—it's about emotions, beliefs, and behaviours formed long before you arrived in Canada.
Did you grow up in a culture where discussing money was taboo? Or perhaps in a community where financial success was openly displayed, leading to pressure to keep up appearances? Maybe you lived through economic instability that taught you to stash cash rather than invest it. Experiences like these will shape your interaction with money today. Being aware of your money mindset involves recognizing the profound impact your past experiences have on your current financial decisions. The guilt when indulging in luxuries and the anxiety when checking your bank balance are not random emotions but a reflection of your financial upbringing. This introspection can lead to greater self-awareness and better financial decision-making.
Why care? Because unexamined money beliefs lead to habits that sabotage even the best financial plans. As I always tell my clients, a plan without execution has no purpose. You might earn an excellent salary as a professional but still feel financially insecure. You might avoid investing because it feels "risky," even though living costs steadily erode your savings.
Whether you feel scared or think your money mindset is under control, try to find some time to explore your feelings in this area. Some great books to spark your interest in this topic include The Psychology of Money by Morgan Housel, which is the best one out there, in my opinion. And the 5 Types of Wealth by Sahil Bloom, where he explores wealth beyond finances.
Wealth Planning: Building a Secure Future Beyond Just Money
As you can tell by now, wealth planning has a non-financial aspect and is not only meant for the “wealthy.” It’s for anyone uncertain about their and their family’s future and wants to avoid undue hardship.
When setting yourself up for financial success, the most essential part of your wealth plan is to figure out what is important to you. Then, figure out the things or habits you surely want to avoid. For instance, the number one nemesis to watch is expenses. Expenses are like a slow-moving tide. At first, they seem harmless, barely noticeable. But before you know it, the waves have swallowed you up, leaving you stuck with no way back. Like the rising tide, unchecked spending will quietly consume your savings, drowning your ability to invest and build real financial security.
In upcoming blogs, I’ll address a few key areas of wealth planning, such as financial, tax, estate, family law, and insurance planning. However, most people have an unstructured and limited approach to planning, looking at the challenges they face in isolation and neglecting to appreciate the interconnectedness between the different planning scopes.
For instance, cash management and budgeting are the foundations of financial planning. Although you may be frugal, misallocating those savings will cost you more in forfeited tax savings and a reduced nest egg for your retirement. What’s the point of being frugal if you unnecessarily lose money to the tax man? A typical example of the misallocation of savings arises in the debate between the tax-sheltered accounts known as Tax-free Savings (TFSA) and Registered Retirement Savings Plans (RRSP). Unfortunately, there are still people who believe RRSPs are scams. When in fact, there is a benefit to using both accounts as you progress in your wealth journey. Anyway, more on a different blog.
As an immigrant, you took calculated risks for a better future. Wealth planning is similar but with (hopefully) less paperwork. You'll do well if you can manage the emotional swings of investing, tame destructive money habits, and effectively use the tools available, which we’ll explore in later blogs.
Credit: Your Ticket to Financial Flexibility or Ruin
In Canada, credit history is like the financial equivalent of your social media profile; it's your digital reputation, and everyone seems to be checking it. But rarely do people understand how it works and its economic impact. Without a Canadian credit history, you’ll encounter challenges accessing essential services such as renting, especially in this competitive market, or qualifying for loans.
Building a good credit history should be one of your top financial priorities if you've recently immigrated. You can take advantage of New Immigrant bank offers that allow you to get your first credit card, even without a credit history. But before you swipe that card, here is the secret to building and maintaining your credit score:
- Paying your card balance on time, every time. Do not skimp on this. Late payments don’t just hurt your score, but it comes with interest charges.
- Do not max out your credit card. Keep your credit utilization at or below 30% of your limit.
- Don't apply for multiple credit cards; your score will not improve. The type of credit will.
Credit is a powerful tool. It will open doors, help you reach financial goals, and make life easier. But it’s built slowly, and if misused, your credit reputation evaporates, becoming a burden that’s tough to escape. The key? Treat it with respect. It’s not extra income—it’s borrowed money that needs to be repaid. Use it wisely; it will work for you, not against you.
Financial Confidence in Your New Home
As you can tell, wealth planning isn't just about understanding TFSAs and RRSPs—it's about creating a system that works for your unique situation without neglecting your emotions. Your relationship with money travelled with you to Canada, but it can evolve just as you are developing in your new country.
What financial beliefs did you bring with you to Canada? And which ones are you ready to leave behind? Perhaps the most significant investment you can make isn't in stocks or real estate but in reshaping how you think about money. After all, isn't transformation what the immigrant journey is all about?
