It seems like everyone has advice for you but now you are an adult in a world that you don’t know, people you don’t trust or know if you can trust.You have a job, maybe not a career yet but you are looking for one.Maybe you have student loans to pay off.You probably have a credit card and maybe even a car loan.After all you graduated; gotta have wheels.Maybe you want to buy a house In a few years but the costs seem almost insurmountable.Maybe you want a holiday next winter and of course those new clothes to show your new found wealth.You’ll talk it over with your friends in the pub on Friday and Saturday night.Maybe they will have some ideas.Time for a reality check and you need it big time.
Okay, here is the scoop.First of all there is hope.Secondly, only you can control your finances.You NEED to decide what is important to you; not today but 5 years or more down the road.If you can't see past today then you need to stop reading right now because you are likely headed for financial trouble and nothing said here is going to change your habits.
Let’s start right from the beginning.You are now a financial endeavour. Make no mistake about it.Go to the bank and they see two things; revenue and expenses.They see that in you and for themselves.Get used to it because this is the reality of life.You can't escape the banks but you can use them to your best advantage.
Look over your banking options.Do you need a bank or do you have access to a Credit Union?If so, you might be well advised to see what they can offer you.You might be pleasantly surprised.Remember, you want to grow your wealth.Yes wealth.If you have a dollar it is wealth.What you do with it is what will make or break you financially.
First, let’s look at the income side.Income is what you bring in right?Wrong.It is what you bring in PLUS the returns you get on your savings.It includes tax reduction that can be used for increasing your wealth as well as dividends you receive for your investments.It all adds up.
Next you look at your expenses.Some are necessities like food, clothing and rent.The rest are lifestyle and while you may think you can't live without your i-Phone; think again.Even within the necessities you have options.You can buy steaks every night and wear designer clothes or you can eat cheaply (and probably more healthy) by cutting back.Your apartment doesn’t have to be downtown but could just as easily be half the price in one of the burbs.Get the idea?
Now to those other expenses; your credit obligations.First thing you have to do is rent a safety deposit box and put your credit cards in it so you aren’t tempted to use them.Next you need to make a list of all your debts with the high interest debt at the top.Get rid of those ones first once you implement your plan.
Now let’s start to put it together.Some advisors disagree with me but I believe in paying yourself first.This means you take a percentage of your weekly wages and commit them to savings.Ten percent of your gross (not take home) is a good starting point.Talk to the investment advisor at your financial institution and s/he will set up a savings plan that will withdraw that money from your account every week and it will be placed into a savings plan that you work out with them.No, you don’t need to have thousands of dollars to get started.But it will add up.Here is why.
That money if you are smart can be invested into an RRSP.This will give you a tax write off which reduces your tax load at the end of the year.Take that refund and put it into your RRSP for next year and you have compounded your contributions giving you an even bigger tax break next year, plus the RRSP will grow because it will also earn interest.Now that is making your money work for you.If you are in a Credit Union your dividends can be reinvested into the Credit Union or put into your RRSP.Amazing that all this money you didn’t know you had suddenly appears isn't it?
Now to your expenses.As I said, you need to get rid of your debt and fast.Live frugally and get it down.If your debt is larger than 30% of your net income after your savings deductions, you are in trouble.You absolutely have to make lifestyle changes and get that debt down.You will be surprised at how little time it actually takes.Then you can commit that 30% toward the future in savings for a house if you are inclined to buy one.Again, talk to your financial adviser at your financial institution.The more money put down on the purchase the more “equity” you have.Equity is how much of that property you actually own.The balance is what is called a liability; money you owe and as you pay that down, it becomes equity.
The greater your financial equity, the easier your life will be.You will get preferred loan rates when you need them, your banker’s ear when you need it and you will have play money to boot.The trick is to start when you are young and instead of enjoying that raise, put it into savings and continue to live frugally.A good credit rating is more than paying your bills on time.It is also paying yourself and in that, it pays you again and again.
Control your debt.That is your biggest concern financially, live within your means and above all, pay yourself first.Retirement is a lot closer than you think if you do it properly.