Growing your wealth is challenging, especially as a young person! From living expenses to loan payments, your spending can feel like it’s adding up, making your goals feel out of reach. But personal finance isn’t impossible with the right advice. We’ve rounded up the 6 best ways young professionals can set themselves up for financial success.
1) Start saving for retirement
In your twenties, it’s easy to feel like you can’t save for anything between rent, student loans and other expenses, but that shouldn’t stop you from getting a head start on your future. Simply put, the earlier you start saving, the more your money will grow over time, according to CNN’s guide to retirement.
In Canada, the majority of working people over the age of 18 are required to contribute to the Canada Pension Plan until the age of 70. But this isn’t enough to live comfortably through retirement, making your own investments in your future a must. Turn to a financial advisor for a plan that makes sense for you now — and is one you can stick to! The sooner you start, even if its just with a modest monthly amount, the easier it is for saving to become a habit.
2) Set financial goals
Having a goal will help you determine exactly how much money you need for specific accomplishments. To set your goals effectively, you should split them up between:
- Short-term goals
- Mid-range goals
- Long-term goals
For example, the vacation you want to go on? It’s a short-term goal. Putting a down payment on a home is a mid-range goal while your retirement savings is more long-term. Setting financial goals will help you grow your money faster while keeping realistic expectations for yourself.
Every goal needs a starting point, and more often than not, that starting point is a budget. If you don’t have a budget, then what’s the point of having a saving goals? Maintaining a budget will keep you on track in meeting your goals and prevent you from careless spending. We recommend you start by tracking your spending for a few weeks to see where your money goes, helping you to create a budget that works for you. Numerous free or low cost apps are available to assist and some banks provide worthwhile tracking systems that can help
4) Learn how to invest
According to Rule One Investing, many beginner investors opt for short-term trading over long-term investing. What many people don’t realize is that there is often more risk to trading in and out of stocks in a short period of time rather than buying and holding them for years.
Take time to learn how and where to invest your money with the help of a financial advisor in order to avoid making a big mistake. Their knowledge and experience will help you navigate these decisions for a plan that will reward you with a diversified portfolio.
5) Keep credit card debt to a minimum
As mentioned in our last blog post, racking up credit card debt is the most common misstep people make. Credit card debt is one of the most expensive forms of debt with high interest rates. Many people make the mistake of spending more than they earn, but the key to saving is to live below your means. You do not need to spend your entire credit limit in a month. To reiterate, you shouldn’t spend more than 30 percent of your limit.
6) Get better at your job
You may already be at the top of your game professionally, but that doesn’t mean you can’t get better. The more valuable you are to your company, the more valuable you are financially. Work hard to make sure you get paid what you deserve. As you move up the company ladder, or build off your newfound income increase, be sure to keep a gap between your savings and your earnings.
If you’re a client, contact your advisor and let them know about your goals. If you want to learn more about working with us for financial planning to set yourself up for success, contact us.
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