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Wednesday, 23 May 2012

Buy now, save later

For first time homebuyers, trying to save for a down payment and retirement simultaneously is a difficult task. Additionally, suggestions for what percentage of your income should be going towards each are constantly streaming in. This article from Moneysense acknowledges that each financial situation is unique, therefore, saving and spending strategies must be customised, just like household budgets.

One suggestion explored in this article is brought forward by Malcolm Hamilton, from Mercer, a human resources company. His strategy suggests putting 20% of your income towards the mortgage until it is paid in full, then applying that 20% to an RRSP. This method seems to be a workable option for most Canadians in their 20s and 30s, as purchasing a home is top priority.

Of course, when adopting the 20% strategy, there are several factors to consider. The strategy is based on an average Canadian income, and those with higher or lower incomes should adjust accordingly. Those with student loans and those who are part of a workplace pension program should take these factors into account.

Finally, taking on a saving strategy of this sort requires discipline. It is reported that although many Canadians are extremely focused when it comes to paying down debt, they don't necessarily apply the same standard to saving. It can be tempting to use that suddenly available 20% for other purposes. The article also stresses the importance of creating an emergency fund. For advice tailored to your specific financial situation, contact a qualified Mortgage Broker.

For the full article from Moneysense, click here.

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