Five Tips for Getting Started on your Financial Journey
If you’ve listened to my podcast you may remember that my wife Robin and I have three kids. Two have already graduated from university, and our daughter, the baby, is going into her third year. Whether they like it or not, I am pretty vocal about the importance of putting good financial habits into place early on and I’m not shy about letting them know my thoughts. I’m not sure if that’s the parent or financial advisor in me – or maybe a bit of both.
When you first start making money, it’s exciting. Exciting to have your own money and exciting that you can decide how you want to spend it. You might still be living at home and have low expenses, or you might be out on your own and need to make ends meet. Regardless of your situation, there are things you need to do to set yourself up for success. Here are my top five tips that will get you on the right track.
#1. Pay yourself first!
Nothing impacts your long-term financial success more than having a solid savings strategy and paying yourself first is the best way to achieve this. This means designating a certain amount of your monthly income to pay yourself before you pay your bills or anyone else. The amount can be $50 a week, $100 or ideally, at least 10% of your paycheque.
Here’s an example of just how powerful an impact this can have. $100 a week at 6% will grow to over $200,000 in 20 years. Save $200 a week and you’ll have over $400,000! Most people pay all of their bills and expenses first and then tend to spend whatever is left, which leaves them with little or nothing to show for it.
To get started, set things up automatically so that the money you allot to pay yourself goes directly into your savings each month. In my opinion, this is the single best thing you can do to build your wealth.
#2 Spend less than you earn
An obvious one I know, but frankly, this is one that trips up a lot of people, particularly because interest rates have been fairly low for some time and credit is easy to get.
Even if you are quite disciplined with your spending, the only way to truly stay on track of your inflows and outflows is to create - and of course, stick to - a budget. Here’s a high level explanation of what you’ll need to do. For more detailed information, check out my