Doesn’t matter what education level or career path you chose, everyone longs for financial security and financial freedom for retirement. When you are young, 30 and 40 year olds seem very old, over the hill and past their prime. However, time passes quickly and you will soon realize how young 30 is, yet how fast you reached this age.
Feeling young also means putting things off. That “forever young” feeling is quite common and leads many to putting off setting their financial goals or if set, working towards achieving them. It’s important you set your finances up early, and work towards your milestones as diligently as possible.
Getting on the right track involves a look at many aspects of your life. However, here are a few pointers to set you off in the right direction.
Contribute Regularly to your RRSP
Time is only your friend when you take advantage of it. Start early and start contributing a set amount of your earnings towards your RRSP. Do this with your regular pay intervals rather than at the end of the year when you have to write a big cheque. This will ease the burden and allows you to harness the power of compounding interest.
As a rule of thumb, set your goal to have 50 percent of your current annual salary invested into RRSP’s by age 30. Regularly visit and tweak your contributions so that you are able to achieve this goal.
Pay Yourself First
Set aside part of each pay for a savings plan. This could go in to a TFSA account or even just a savings account. Regardless, ensure that you set up a savings plan and that you always have funds set aside to cover emergencies or expenditures without having to go into debt. Credit Cards are not meant to carry balances. They should be paid in full each and every month. Start small and work your way up. Your initial goal should be to have 3 months of living expenses saved. Once you reach this goal, work your way to 8 months, then 12, etc.
Set A Goal Of Buying Your First Home Rather Than Renting
Even if it makes more sense for you to rent, rather than own, save for a home purchase, even as an investment. Owning a home is forced savings and builds equity. Even if prices do not appreciate, with today’s low rates, you are paying a considerable portion of the mortgage off each and every month. Real estate prices do in fact increase however, which will make you realize even a higher gain on the investment. Renting year after year will result in no gains and after tax expenditures for rent with nothing to show for it.
Debt Can be Your Enemy
Many people, especially the young, have a hard time managing their credit card and other debt. Ensure part of your goals is to have debt fully under control. Keep your loans to a minimum and do not carry balances on credit cards. If you find yourself purchasing items on credit cards and not being able to pay them off the next month, something is wrong and needs to be re-visited. Budgeting is key.
Set Up Your Life Insurance
Sure, no one bothers to think about this in their 20’s. But, setting up a plan based on future requirements early will save you thousands of dollars over the years.
We won’t know what life will throw at us. But planning ahead, setting your goals and monitoring your game plan will go a long way in making your future much brighter.
VERICO The Financial Forum Ltd.
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