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🍁 Money order of operations (CAD)By Chris Coffin · last reviewed

What to do with your money, in order

10 steps, in the order the money should actually go. Every one shows the number for your situation, names who recommends it and who pays them, and flags the places the sources Canadians trust most genuinely disagree with each other.

Your numbers

Every figure below is worked out in your browser as you type. Nothing you enter is sent anywhere, and there is no account.

A few more, if they apply to you

Step 1. Find out where the money actually goes

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Usually asked as“I earn decent money but there is nothing left at month end. Where is it going?”

You cannot allocate money you have never measured. This one comes before all of it.

Rule of thumbA common starting split is 50/30/20: needs, wants, then saving and debt repayment.

Every step below this one is an instruction about where to send a surplus, which is useless until you know whether you have one and how big it is. Tracking actual spending for a month or two is unglamorous and it is the step people skip hardest, usually because they already believe they know the answer. The gap between what people estimate they spend and what they actually spend is the single most common surprise in this whole sequence.

Common mistakeThe 50/30/20 split is a teaching device, not a rule. In an expensive city rent alone can exceed 50%, and that does not mean you have failed.

Build the split on your real take-home →

start from your actual take-home pay →

Step 2. Put $1,000 somewhere you can reach it

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Usually asked as“Should I save anything at all before I attack my credit card?”

Yes. A small buffer first, even with expensive debt sitting there.

Rule of thumbHold roughly $1,000 in cash before making extra debt payments.

This is the step most versions of this list skip, and it is the reason so many people end up back where they started. Paying every spare dollar at a credit card leaves nothing for the transmission, so the transmission goes on the same card and the balance never falls. A small buffer breaks that loop. It is not an emergency fund yet and it is not invested; it exists purely so that one bad week does not undo six good months.

Common mistakeDo not let this stage drift. It is a buffer, not a savings goal, and the debt in the next step is costing you more every month you stay here.

Where the sources disagree on this →

Find the room in your budget →

Step 3. Clear anything above about 8%

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Usually asked as“Should I invest, or pay off my debt first?”

Pay it off. It is the only guaranteed, tax-free return you will ever be offered.

Rule of thumbAbove 8%, pay it down before investing. Below that, it becomes a judgement call rather than arithmetic.

Clearing a balance returns exactly its interest rate, guaranteed and tax-free. A card at 21% is a guaranteed 21%, and no portfolio can promise that. So expensive debt comes off the board before investing rather than alongside it. The cut-off sits around 8%, which is roughly where a debt's certainty stops beating a diversified portfolio's higher but uncertain long-run return.

Common mistakeThe 8% line is a convention, not a finding: no regulator publishes one. Below it, and a mortgage is the usual case, this becomes a question about your risk tolerance.

Where the sources disagree on this →

Model a payoff plan →

Step 4. Build the buffer up to 3 to 6 months

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Usually asked as“How much emergency fund do I actually need, and where do I keep it?”

Months of essential spending, in a savings account you can reach the same day.

Rule of thumb3 months if your income is stable, 6 or more if it is not. Keep it in cash, not investments.

An emergency fund is not an investment. It is what stops you selling investments at the worst possible moment or reaching for the card you just paid off. Size it in months of essential spending rather than as a share of income, because the thing it exists to survive is income stopping. Single earners, commission work and cyclical industries all argue for the higher end.

Common mistakeLocking it in a GIC to chase a slightly better rate defeats the point. An emergency fund that is not available during the emergency is just savings.

Where the sources disagree on this →

Size it against your spending →

Step 5. Take the whole employer match

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Usually asked as“Is my employer's RRSP match actually worth it?”

It is part of your pay. Declining it is a voluntary pay cut.

Only if your employer offers a match.

Rule of thumbContribute at least enough to collect every matched dollar. Nothing below beats it.

If your employer matches pension or RRSP contributions, that money is compensation you have already earned and simply have not claimed. A fifty percent match is an immediate fifty percent return before the money is invested in anything at all, which is why it outranks everything below it and, for most people, everything above it except genuinely toxic debt.

Common mistakeContributing past the match is a different decision entirely. That is an ordinary RRSP question, answered further down by your marginal rate.

Add your match →

Step 6. Money you need within 5 years stays out of the market

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Usually asked as“I am buying a car in two years. Should I invest that money in the meantime?”

No. Money with a known date and a short fuse belongs in cash, not in markets.

Rule of thumbUnder 5 years, use a savings account or a GIC timed to the date you need it.

A down payment, a car, a wedding, tuition: anything with a date attached inside about 5 years should not be exposed to the market, because the market's worst stretches are longer than your deadline. This is the step that separates saving from investing, and conflating the two is how people end up selling at the bottom because the deposit is due in March.

Common mistakeA GIC that matures after you need the money is the same mistake as a stock fund. Match the term to the date, not to the best advertised rate.

Set the goal and its date →

Step 7. Collect the 20% education grant

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Usually asked as“Is an RESP worth it, or should I just use my TFSA for the kids?”

Worth it, and it is not close. The grant is a guaranteed 20%.

Only if you have children under 18.

Rule of thumbContribute $2,500 per child per year to collect the full $500 grant. Lifetime cap $7,200.

The Canada Education Savings Grant pays 20% on the first $2,500 you contribute for a child each year. That is a guaranteed return matched almost nowhere else in Canadian personal finance, and it is the same argument as the employer match: free money attached to an account you have to actually open. It runs until the year the child turns seventeen.

Common mistakeUnused grant room carries forward, but only one extra year at a time. Skipping several years in a row permanently forfeits grant you cannot buy back later.

Plan the contributions →

Step 8. Fill the FHSA before the RRSP or the TFSA

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Usually asked as“FHSA, TFSA or RRSP first if I am saving for a first home?”

FHSA, clearly. It is the only account that is deductible going in and tax-free coming out.

Only if you are a first-time home buyer.

Rule of thumb$8,000 a year to a $40,000 lifetime cap, then the RRSP, then the TFSA.

The FHSA is the one place the usual trade-off disappears. An RRSP deducts now and is taxed later; a TFSA is taxed now and never again. The FHSA does both halves: you deduct the contribution and a qualifying withdrawal for a first home comes out untaxed. For an eligible first-time buyer there is essentially no reason to save a down payment anywhere else first.

Common mistakeIt stacks with the Home Buyers' Plan rather than replacing it, so a couple can draw on both. Room only accrues once you open the account, so opening early costs nothing and waiting does.

Track your FHSA room →

Five questions before you invest anything

Nobody can tell you what to buy without these, and an answer given without them is a guess wearing a ticker symbol.

  1. PurposeWhat is this money actually for?
  2. TimelineWhen will you need to touch it? Under 5 years changes the answer completely.
  3. Risk toleranceHow would you react, in practice, if it dropped 30% and stayed there for two years?
  4. PrerequisitesEmergency fund in place, expensive debt cleared, employer match collected?
  5. Management styleDo you want to place trades yourself, or have it managed automatically?

Step 9. RRSP or TFSA, decided by your marginal rate

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Usually asked as“TFSA or RRSP, which one should I fill first?”

Whichever bracket is higher: yours today, or the one you expect in retirement.

Rule of thumbHigh rate now and lower later favours the RRSP. The reverse, or benefit clawbacks in retirement, favours the TFSA.

Both shelter growth from tax and they differ only on when you pay. An RRSP deducts at today's marginal rate and is taxed on withdrawal, so it wins if you retire into a lower bracket. A TFSA is funded with taxed money and comes out untouched, which wins in the reverse case and never claws back income-tested benefits like OAS.

Common mistakeAn RRSP only beats a TFSA if the refund is invested too. Contributing and then spending the refund is roughly the same as making a smaller TFSA contribution.

Read the full comparison →

see the bracket maths on your salary →

Step 10. Buy one global fund that matches your horizon

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Usually asked as“What should I actually invest in once the account is open?”

One globally diversified, low-fee fund, sized to when you need the money.

Rule of thumbAll-equity suits a 15-year-plus horizon. Shorter than that means more bonds, and the fund family has a version for each.

What goes inside the account is close to a solved problem. A single globally diversified one-ticket fund holds thousands of companies and rebalances itself, removing the two jobs beginners most reliably get wrong. The open question is not which company but how much stock: the same family runs from all-equity down to mostly-bonds, and the honest input is your time horizon and how you would react to a large drop, not a preference for growth.

Common mistakeMoney you need inside 5 years does not belong in stocks at all. And an account is not an investment: cash parked in a TFSA has not been invested.

3 of the disagreements below are about this step →

What is actually inside one →

how long until the fund covers you →

Bonus. Pick a broker, then stop researching brokers

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Usually asked as“Wealthsimple or Questrade? Which broker should I open this at?”

Any mainstream one. This is the smallest decision on the page.

Rule of thumbCommissions are zero at the majors. Compare currency conversion and account types.

Broker choice is the last and least consequential decision here, and it is reliably the one beginners spend the most time on. Stock and ETF commissions have gone to zero at the major Canadian discount brokers, so what is left is currency conversion costs, which account types are offered, and whether the interface leaves you alone or tempts you to fiddle.

Common mistakeThe expensive outcome is choosing none of them. Money sitting in chequing while you research brokers costs more than picking the wrong one ever will.

Compare the two most common →

Where the trusted sources disagree

QuestionThe common answerWho dissents, and why
Are these four independent sources?Step 10 Pick one fundThey are usually cited side by side, as separate authorities that happen to agree, and that agreement is treated as corroboration.Three of them share an employer. Dan Bortolotti (Canadian Couch Potato), Justin Bender (Canadian Portfolio Manager), and Benjamin Felix and Cameron Passmore (Rational Reminder) are all portfolio managers at PWL Capital. Their agreement is real and it is well argued, but it is one firm's house view, not four independent confirmations of it.
Plain cap-weighted index, or a factor tilt?Step 10 Pick one fundOne globally diversified, cap-weighted, one-ticket fund such as XEQT or VEQT, held and topped up.Felix's team builds client portfolios from Dimensional and Avantis funds tilted toward size, value and profitability. So the same firm publishes cap-weighted one-ticket portfolios for do-it-yourself readers and implements tilted ones for its own paying clients. Both positions are defensible, and Felix is explicit that a tilt should not be expected to win consistently, but they are not the same advice.
Is “just buy XEQT” actually the advice?Step 10 Pick one fundA single all-equity one-ticket fund, bought and held, is the default answer handed to almost every new Canadian investor.Bender's own mapping does not say that. It puts all-equity at a fifteen-year horizon and steps down through mostly-stock, balanced and mostly-bond versions as the horizon shortens, and it starts from a risk questionnaire rather than from a ticker. The shorthand and the source it gets credited to do not quite agree, and the shorthand is the one that travels.
Emergency fund first, or high-interest debt first?Step 2 Starter buffer Step 3 Kill toxic debt Step 4 Emergency fundClear toxic debt before anything else, because its interest rate is a guaranteed return no portfolio can promise.The Financial Consumer Agency of Canada puts a small starter buffer ahead of the debt, then rebuilds to three to six months once the debt is gone. This page follows FCAC, which is why there is a step 1 at all: a strict debt-first order leaves no cushion, and that is what sends people back to the same card the first time something breaks.

Frequently asked questions

Is this a subreddit's official guide?

No. This page is not affiliated with, endorsed by, or copied from any subreddit, its wiki, or its moderators. It is assembled from published Canadian sources, each listed with who runs it and who pays for it, so you can check any step against the original rather than taking this page's word.

Why does every step list who funds the source?

Because it changes how much weight a recommendation deserves, and it is a fact rather than an opinion. A free university course sponsored by a bank, a blog whose author manages portfolios for a fee, and a government regulator are all useful, and they are useful in different ways. None of that makes a source wrong. It just means agreement between two of them is worth less when they turn out to share a payroll.

Do I have to follow the steps strictly in order?

No, and the sources themselves do not fully agree that you should. The order is a default for the common case, not a rule. Two steps are conditional and simply will not apply to many people. A workplace match usually beats everything below it, and a mortgage at a low rate sits close enough to expected portfolio returns that it becomes a question about your own risk tolerance rather than arithmetic.

Where do the numbers on this page come from?

The tax brackets and the contribution limits come from the same data file the rest of this site is built from, so this page, the calculator and the methodology page cannot disagree with each other. Everything is worked out in your browser. Nothing you type is sent anywhere.

Is this financial advice?

No. This page is educational, and it is not financial, tax, or legal advice. It shows the arithmetic on the numbers you enter and cites where each recommendation comes from. For decisions with real money at stake, talk to a qualified professional who can see your whole situation.

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