If you’re in your 20’s, you may find that money is in short supply. Perhaps you’ve got student loans to pay off and are trying to juggle a part-time job on top of school commitments. Or maybe you’re trying to make ends meet for rent and car payments on the starting salary of your first full-time job. Regardless of your specific situation, there are some key guidelines you should start following now, to set yourself up for a comfortable financial future.
- Set financial goals. Without goals to strive for, it can be hard to stay motivated about your overall plan for financial success. A tip to get you started: create a spreadsheet at the end of each month to record your spending habits. Organize your expenses by category such as food, rent, clothing, entertainment, etc. This will help you identify where you spend the most money. You can use this spreadsheet to set goals by reducing your spending in each category. For example, if you find your money is going towards fast-food at lunch every day, try to limit yourself to eating out once a week, and make a conscious effort to bring a packed lunch for the remainder of the week. The equation is simple: the less money you spend, the more money you have available to contribute towards savings.
- Take responsibility for your financials. It’s good to learn the basics from your parents, but if you haven’t already, you need to start taking the lead on paying your own bills, filing tax returns, and learning more about financial options such as Tax Free Savings Accounts (TFSAs) or Registered Retirement Savings Plans (RRSPs). Once you start handling basic financial tasks on your own, you’ll have a better appreciation and understanding of your financial situation.
- Start setting money aside in a process that works for you. The sooner you start saving for retirement or adding money to an emergency savings account, the easier it will be for you if or when you face difficult financial situations in the future. Evaluate how much money is realistic for you to put aside based on your personal needs and salary, and never compare yourself to others. Each person has their own unique financial situation, so be sure you put yourself first when beginning to save.
- Finally, don’t spend money you don’t have. The perilous world of credit cards allows us to spend, whether we have the money to pay the bills or not. Treat a credit card with the same mentality you would use for a debt card or cash. And although that shiny new smart phone would be great to have, if you are using a credit card to buy it and can’t pay it off immediately, think hard about whether you really need it. Debt and savings do not go hand-in-hand, so spend wisely.
The good thing about being in your twenties? You’ve got time on your side, and you can still recover from any financial mistakes you may have already made. If you need help resolving personal debt, call today for a free consultation.