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Get the Most from Your Minimum Wage Increase

Date posted: March 15, 2018
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Get the Most from Your Minimum Wage Increase

Get the Most from Your Minimum Wage Increase: 4 Smart Ways to Spend (and Save) Your Pay Raise Like a Boss 

Now that the minimum wage increase has been in effect for a couple of months for many provinces, a lot of Canadians are seeing a bump in their pay. For instance, on January 1, Ontario’s minimum wage rose by $2.40 an hour, boosting the minimum wage from $11.60 to $14.00. That's a huge jump that adds up to more than $5,000 per year for a full-time worker!  So how can you put that extra money to good use?

1. Pay off your worst debts

A recent survey of 2,000 Canadians by Ipsos found that nearly 50% did not think they’d be able to pay for all their living expenses in the next year without taking on more debt.

Consider this extra $5,000 from your minimum wage increase a ticket to helping you get out of debt – for good. Steer that extra cash into paying off your credit-card debt, your line of credit, or wherever you're paying the highest interest rate, such as payday loans.

How?

  • By setting up regular automatic payments, you won't miss the extra money.
  • By taking on a new loan that combines and pays off multiple smaller loans and debts, you can reduce interest rates overall and pay down debt faster.

Click here to find out if debt consolidation is right for you.

2. Protect yourself by saving money in an emergency fund

Unexpected things will happen, and you need a cushion for those out-of-the-blue expenses. If you don't need to tap the extra cash, it will be there (preferably tucked away in a savings account) until you need it for emergencies such as a medical or dental situation, job loss, or an unexpected vet bill. 

Click here to learn how to set up an emergency fund.

3. Invest in yourself and your future – Spend where it’ll make you more money 

  • Take courses to take your career to the next level: If you want to upgrade your skills to land that higher-paying job with a current or new employer, using this money to take a course is never a bad idea.
  • Get your side gig on: Thinking about taking that hobby to the next level? For example, buy a lawnmower to make some extra cash. Whether you just need to print up marketing materials, or put a down payment on equipment, this is a good time to think of new income sources.  

4. Invest in one-time purchases that save money on repeat expenses

  • Treat yourself to a bicycle (and save on transit fares): If you rely on public transit, hop in the occasional Uber or borrow a friend’s car, consider joining the bicycle generation and start saving on transit fares and gas. A decent bike can be as low as $150, or even lower for a second-hand one. It doesn’t take long to see the difference in your bank account.
  • Upgrade your kitchen with a coffee maker: Say good bye to your takeout coffee addiction by investing in a coffee maker. The amount people spend on takeout coffees is mind-blowing, but creating your own coffees is a fraction (around 25%) of what you’d shell out on your way into work.

Wait, how much of my extra income should go towards debt and savings?

It depends on your situation, but your total income, including that boost from your minimum wage increase, can be spread out using the 50/20/30 general guideline for budgeting:

  • 50% for fixed costs that don’t change much, like rent;
  • 20% for goals like paying off debt faster and saving for emergencies;
  • 30% for day-to-day expenses that vary, like groceries.

So, take your pay raise and resist the urge to spend by using that extra cash to improve your financial future!

 

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