Financial Tips for New Canadians
Navigating Canada’s Financial System

^{By Bromwich+Smith Staff | 1580 words | Reading Time: 8 minutes  | Date: 2024/01/16}

Canada’s financial system can be tricky to navigate at the best of times, and for the over two million new permanent residents who arrived in 2023 it may be overwhelming. How do you know what options are best for you and what rights you have to improve your financial situation? Often, newcomers receive support from the government or local agencies on how to write a resume, find a job and a place to live, but there is not much information available on budgeting, credit, or financial planning. Often for newcomers, there are many misconceptions and misunderstandings when it comes to how to manage credit and debt in Canada. 

Let’s start with some money basics. Understanding what money you have each month will help you plan for your financial future. It is important to be aware that your budget needs to change as your expenses or income change. 

Understand your income.  

Simply put this means identifying what money is coming in each month. These include your employment income, financial aids or supports, and any other money you receive regularly.  

Understand your expenses.  

There are two types of expenses to identify.  
1. Set expenses that will not change month to month: your mortgage or rent, insurance, car payments, fixed loan payments, etc.  

2. Variable expenses are the ones that can change from month to month. Usually, these are the expenses that you can control and may be able to lower if you need to. These expenses often include entertainment costs, groceries, cell phone bills, cable bills, utilities, credit card debt and debt payments. 

Track your spending.  

Know what you're spending each month will help you understand what you can cut down or reduce to have extra money for debt payments, savings, or unexpected expenses.  

Savings. 

Many Canadians struggle with the idea of setting aside some money for savings, especially when they are struggling with debt. It is important to have money set aside for those emergency situations that tend to come up at the worst of times.  

1. Start by setting up a savings account. Online banking makes it easy to automatically transfer money from a chequing account to a savings account automatically. 

2. Set a goal. What are you saving for? Start with a realistic goal, that can grow as you are able to evolve the goal over time. This should include things like emergency savings  or savings for retirement, but could also include debt repayment, tuition costs, down payment for a home or more.  

3. Grow your savings. If you receive any extra income, you may be able to grow your savings quicker. If you know which goal is a priority you can determine where to best place your added income.  

Credit and Debt  

If you’re new to Canada, you may be new to all the ways you can borrow money. It’s important to keep in mind that there is always a cost to borrowing money, and that how you handle your debt repayment is tracked in the form of a credit report.

You may be offered a credit card, which can feel like the gift of money. It’s not: any balance remaining after the due date (usually once a month) is subject to interest and fees. If you purchase a large item like an appliance, furniture, or even a car, you may be quoted a monthly payment. Make sure to check the total purchase amount, as you may be responsible for a larger amount than you expect.  

There are many options, make sure you ask lots of questions, and fully understand what’s being offered. And if you are feeling overwhelmed debt, you have options. 

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Debt Relief 

Canadians have the right for debt relief assistance, through government regulations referred to as the Bankruptcy and Insolvency Act. There are federally regulated debt relief programs to aid Canadians struggling with finances, including Consumer Proposal or Bankruptcy. While there are many organizations that will promise they can help relieve your overwhelming debt, only a government regulated Licensed Insolvency Trustee like Bromwich+Smith can help you with either of these. 

There are also other options including debt consolidation loans or credit counseling. If you are looking for debt relief make sure to do your research first: check out each company’s Google reviews from current and past clients, and call the ones that you feel most comfortable with. With a Licensed Insolvency Trustee like Bromwich+Smith, you will be provided a free, no obligation consultation and have all your  debt relief options explained to you.  

Even if a Consumer Proposal or Bankruptcy is not your best choice, we're more than happy to share our knowledge with you. We want to ensure that you succeed in your financial future. 

Bromwich+Smith has a number of debt relief strategies to help you regain control of your finances and get your life back on track. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s Debt Relief Specialists are available by phone at 1-855-884-9243, or request a call back at contact us page. 

FAQs: 

1- What is a credit score and why is it important for Canadians? 

A credit score is a number that explains your creditworthiness based on your credit history. Essentially it determines if you are eligible for credit including credit cards, mortgages, loans or other financial products. A good credit score will help you qualify for better interest rates and give you more options to obtain credit. It is important to know that having a low credit score doesn't mean you're ineligible for credit. You may need to prove that you are capable of paying off the credit you’re asking for or you may have higher interest rates until your credit score increases. 

2- How can I check my credit score? 

 You can check your credit score for free through one of Canada's credit bureaux including Equifax or TransUnion. You can also sign up for credit card updates and check your credit score on a regular basis. We suggest checking once a year to ensure there's no fraudulent activity on your report. 

3- How can I increase my credit score?

It typically takes six months to establish credit history in Canada but that will vary depending on your credit habits and financial past. You can increase your credit score by ensuring your payments are made on time, have a low debt to income ratio and avoid applying for too much credit at once. Things that may impact your credit score negatively include missed bills payments, debt that goes to collections, minimum payment history, length of credit card history and too many credit checks. 

4- What is a hard credit check? 

When it comes to credit checks there are two terms you need to be familiar with. A soft credit check is something only you can see, and it includes promotional offers, employment verification or checks you have made on your own credit report. A hard credit check will affect your credit score and will stay on your report for two years. This includes when a creditor does a background check on your credit before a loan application for a car purchase, mortgage application etc. 

5- What are some common financial mistakes that new Canadians make, and how can they be avoided? 

Some common financial mistakes that new Canadians make include not saving enough money for emergencies, overspending on credit cards, and not understanding Canadian tax laws. To avoid these mistakes, it's important to educate yourself on the Canadian tax laws and regulations, set up an emergency fund, use credit responsibly, and create a budget and financial plan. 

 6-What are some tips for managing debt and avoiding debt traps? 

Tips for managing debt and avoiding debt traps include creating a budget and understanding what your expenses are, paying off high-interest debts first, consolidating debts into one lower-interest loan, and avoiding taking on more debt than you can afford. Try paying off credit cards in full each month and when that's not possible do not carry more than 50% of your allotted credit at a time. 

7- What financial tools are available to newcomers in Canada? 
 
Financial tools and resources available to new Canadian residents include online banking and mobile apps for tracking expenses and managing accounts, credit monitoring services for tracking credit scores, and financial literacy programs offered by banks and government agencies. 

8- What are the tax implications for new Canadian residents, and how can they be minimized? 

The tax implications for new Canadian residents include paying federal and provincial taxes on income earned in Canada, as well as taxes on any capital gains or investment income. To minimize taxes, it's important to use of tax-advantaged savings accounts when you can and seek advice from a tax professional. 

9-What are some strategies for managing and reducing expenses as a new Canadian resident? 
Strategies for managing and reducing expenses as a new Canadian resident include creating a budget and tracking expenses, reducing unnecessary expenses like eating out or subscription services, and finding ways to save on essential expenses like groceries and utilities. 

10- How can new Canadian residents protect themselves financially and plan for unexpected events, such as job loss or medical emergencies? 
To protect themselves financially and plan for unexpected events like job loss or medical emergencies, new Canadian residents should consider building an emergency fund, purchasing insurance including life, health, or disability insurance, and creating a contingency plan for unexpected expenses. It's also important to seek advice from a financial advisor or credit counselor to create a comprehensive financial plan. 

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