It feels like an eternity that I have been dealing with debt, when in reality, it’s only been about 5 years. Finances have to be one of my least favourite parts of adulting, but I also recognize the importance of financial planning to ensure stability in my future.
A recent priority of mine has been to learn more about my own personal finances and create a long term plan. Through a bit of research and budget planning, I now have a clear picture of my money situation. I know what I should be doing in the next 6 months, and beyond.
This is such a great feeling that I wanted to share with you what I have learned so far in terms of financial planning for young adults. Keep in mind, I am far from an expert on this subject, but hopefully this information will help you as much as it helped me!
Financial Planning: For the Young Adult
Book an appointment with a financial advisor at your bank
This is probably the tip that helped me the most. Get advice from a professional who can look directly at your financial situation and provide your best options.
Calculate your monthly income and subtract your outgoing costs
Find out how much you can save every month if you do not overspend. Multiply that amount by 12 months and see how much you could save in a year! Make specific goals.
Compare your assets (what you own) to your liabilities (what you owe).
Assets can be property, vehicles, savings, stocks, etc. Liabilities can be student loans, credit card debt, mortgages, etc. Take your total assets, and subtract anything you owe (liabilities). What you are left with is your net-worth.
Contribute to a Tax-Free Savings Account or a Registered Retirement Savings Plan on a monthly basis, and don’t touch it.
Make sure you are setting yourself up for financial stability in your future. The younger you start saving for major purchases or even retirement, the better. You’d be surprised how quickly your money adds up when you contribute on a regular basis. Choose an amount you want to have by a certain age and do the math to find out how much you should contribute on a monthly basis.
Be aware of your interest rates on your debt and lower or amalgamate them if possible.
What percentage of interest are you paying on your credit card every month? Pay off your loan with the highest interest rate first. A huge part of financial planning is knowing when to amalgamate your loans onto the one account with the lowest credit, and pay it off as quickly as possible.
Watch your discretionary spending (Want vs. Need)
The little things that you spend your money on, that you don’t actually need. These unnecessary costs really add up and can make a huge dent in your savings.
In order to build good credit, make your payments on time.
This is critical because our society revolves around credit. If you want to purchase a vehicle, a house or even increase your credit limit, you need to have good credit. Having a reputable credit score can sometimes allow you to qualify for lower interest rates.
Hopefully these tips on financial planning for young adults were helpful to you. I still have so much to learn on this topic, but I am proud that I have taken the first steps to being in control of my finances.
Do you have any financial planning tips that I could add to the list? Let me know in the comments below! Let’s help each other be the best we can be.
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