Personal finance should not be confusing in your 20s. We all want to retire early and enjoy 3-day work weeks while maintaining multiple streams of income, investing and achieving financial freedom – so why don’t tackle finance with more confidence?
During my undergrad, heck even for a short time after, I was terrified of checking my bank accounts because of how low I feared my balance would be. I didn’t know how to save besides transferring money from a chequing account to a savings account and the only income I made was from whatever part-time job I had each year I was in school. With a little bit of education and willingness to diversify, today I know how to budget my income, have streams of income besides part-time work and I am taking advantage of multiple tools to ensure that I can maximize my savings and interest made on savings.
Earlier last week I attended a teach:able seminar on managing personal finances as a creator by Tori Dunlap and I walked away with various gems and bits of advice I knew I just had to share. Here are some tips to help you take those first steps towards financial freedom.
1. Stop spending money on things you don’t care about
When was the last time you bought an Amazon item you didn’t think you needed until you saw it in a Youtube video or Tiktok? If you’ve been serially influenced in this way you may want to reconsider the way you consume media. This sort of marketing along with impulse buying adds up to money that you could have been saving or investing. If you don’t have the discipline to refrain from jumping on the bandwagon for items you would not otherwise care for, here’s a step you can take to help with restraint.
Instead of avoiding Youtube videos and Tiktoks entirely, create a wishlist in the notes app of your mobile device. Anytime you want to buy something, add it to the list. Let a few days go by and revisit the list regularly to see if you still feel the same way about that item. Chances are you already have an item which performs the same function at home (yes, that electric candle lighter was not necessary when you had the Bic lighter at home). I also shared some items I no longer care to buy in a previous post here. Cutting back has allowed me to reduce my monthly fixed expenses a great deal.
2. Start a Money Diary/Keep track of your expenses
Our emotions play a huge role in the way we spend money and sometimes we spend to make ourselves feel better, often choosing short term satisfaction in the heat of the moment. For two weeks, keep track of your purchases: what you bought, the cost of the purchase, why did you buy it, and how did it make you feel? Do this without judgement, it is OKAY to spend on yourself but being aware of where your money is going and how your emotions play a role in your financial habits will put you on the right path to taking corrective action.
3. Schedule Financial Self-care Dates
Spa dates are to wellness self-care as personal finance dates are to financial self-care. The only way to get past this one is by going through it – schedule specific dates in your calendar where you take the time to evaluate your spending, savings, bills, investments, the entire sh-bang. This can be twice a month on pay days, or an hour every Friday before the weekend begins. Here are some questions to ask yourself on a personal finance date:
- Check your credit card – Any subscriptions you no longer need? Any double charges? Any purchases you don’t remember making? How much are you owing?
- Check your progress on goals – How much have you saved? Could you increase your contributions? Are there any items you no longer need to save for?
- Is your income determined for the next 6 months? Are you being owed money?
4. Automate your savings
This applies to both long-term savings and your emergency fund. Depending on your situation, you may or may not find that you need to create an emergency fund, however if you are more independent or live alone, this comes highly recommended.
Automating your savings is a VERY small change you can make that makes the idea of saving money less cumbersome. If you know you will be paid a certain amount a certain time each month, you can allow a percentage of that to be routed to a different account on the same day. This way, you wake up to a balance that already has your savings amount deducted.
5. Take advantage of high-yield savings accounts
High-yield savings accounts or investment accounts that give you fixed interest on your money are a great way to save money and make a little on top. They come in all flavours and interest rates vary from bank to bank. If you are looking for a very low-risk option I highly recommend looking into the options your bank has available. Two common savings options are tax-free savings accounts (TFSAs) and registered retirement savings plans. I task you with Googling each one and finding out the benefits and advantages of both accounts.
6. Sit down with a financial advisor
Financial advisors come in very handy when you need the technical jargon explained in layman’s terms. They can also provide great insight on which savings and investment accounts are most beneficial based on your income, short-term goals and long-term goals. Don’t be afraid to approach the ones at your bank (they are free!) and ask for advice. With the help of my financial advisor I was able to maximize my savings and allocate funds that enabled me to move out while still reaching my savings goals for 2020.
The second quarter of 2021 has just begun and if you didn’t know, we are taking “financial independence” to a WHOLE. NEW. LEVEL. I am so glad you made it through this read and have an idea of how to start thinking about personal finance. Stick with me as I continue to discuss diversifying your income, investing and more!
Let’s get smart!
ANTHONIAxo
Photo credits: @blueeyedshutter
