Depending on your total income, these compulsory items can take about 25 to 35 per cent of your total income. If you are self-employed, you might want to put about 30 per cent of your income in a separate account for taxes and savings for retirement. The important thing is to plan your budget based on your take-home pay, not your pay before taxes and deductions. You may find at first that necessities take up as much as two-thirds of your budget. Luxuries are the items you can get with the money left after you pay for the necessities.
Most people have to choose very carefully how they spend that money.
For example, if you must set aside money for education or medical care, there will be less for items such as a car, gifts or long distance phone calls. Both federal and provincial taxes are normally deducted from your pay cheque by your employer. Each year, on an income tax return, you list your income, deductions and tax credits, in order to calculate the taxes that must be paid. If you have already paid more than you owe, you may be eligible for a refund. It is important to realize that financial institutions do not just hold your money in a safe place.