6 Financial Tips for Young Adults

31 October 2018 by National Bank
Financial tips for young adults

Although student debt can be significant, and the desire to take advantage of one's youth can lead to some reckless spending, the beginning of adulthood is a critical period to ensure a prosperous future for yourself. If you act wisely early on, you can reap a lot later on. Here is our advice.

1. Set Your Financial Goals

The best way to maintain healthy finances is to set your short- and middle-term goals. This allows you to choose how to achieve them, for example, by saving a small amount every week. This way, if you plan on buying a first home with your better half, and you start saving $50 a week now and continue during 5 years, it will be easier than trying to find thousands of dollars at once. On the short term, you could also use this same strategy, for example, to take a trip to Europe next summer.

2. A Budget is an Excellent Tool

Managing your personal finances is a genuine challenge, especially when you suddenly have to spend money on all kinds of things you hadn't planned to buy. To avoid falling into debt, a budget remains your biggest ally and, contrary to popular belief, it need not be constraining. It should reflect your needs and help you easily keep track of your income and expenses. Having a balanced budget can help you save money to achieve your financial goals.

3. Anticipating Expenses in Adult Life

Though you may have made a detailed budget, unexpected expenses often crop up. To get a good idea of the expenses involved in an event such as moving into your first apartment, for example, a good strategy is to ask someone who has already gone through this, or your financial adviser, what to expect. Another winning strategy is to set up a contingency fund for unexpected expenses, since they always crop up!

4. Credit Report: Managing Your Financial Reputation

A credit report is a credit history, that is, a person's capacity to pay off their debt. In other words, a credit report is a score used to evaluate a person's reliability when money is lent to them. If you diligently pay off your debt, financial institutions will not hesitate to lend you more money in the future because they will be reassured as to your ability to pay them back. On the contrary, if you skip payments and interest builds up, they will be mistrustful and won't want to lend you all the money you need to achieve your plans.

5. Debt Management: Do Not Overestimate Yourself

The golden rule to not get stuck in debt is to avoid spending more than you can afford. You must rely on your spending capacity, which is determined by way of a budget. Spending more than you earn only further delays the repayment issue, which worsens due to accrued interest.

6. Investing in Your Education

There are several reasons why investing in your education is a wise investment. The $5,000 invested in completing a Master's degree or a specialized course will quickly become profitable as they increase your value as an employee. Having high-demand skills means you will earn a better salary and therefore you pay yourself back!

It all comes down to this: by living according to your means today, when you still don't have any major financial responsibilities (a child, a mortgage, your start-up business loan to repay), you are building good habits that will ensure your long-term financial health!

For other tips and advice to better manage your personal finances, sign up for the National Bank newsletter.

Legal disclaimer

Any reproduction, in whole or in part, is strictly prohibited without the prior written consent of National Bank of Canada.

The articles and information on this website are protected by the copyright laws in effect in Canada or other countries, as applicable. The copyrights on the articles and information belong to the National Bank of Canada or other persons. Any reproduction, redistribution, electronic communication, including indirectly via a hyperlink, in whole or in part, of these articles and information and any other use thereof that is not explicitly authorized is prohibited without the prior written consent of the copyright owner.

The contents of this website must not be interpreted, considered or used as if it were financial, legal, fiscal, or other advice. National Bank and its partners in contents will not be liable for any damages that you may incur from such use.

This article is provided by National Bank, its subsidiaries and group entities for information purposes only, and creates no legal or contractual obligation for National Bank, its subsidiaries and group entities. The details of this service offering and the conditions herein are subject to change.

The hyperlinks in this article may redirect to external websites not administered by National Bank. The Bank cannot be held liable for the content of external websites or any damages caused by their use.

Views expressed in this article are those of the person being interviewed. They do not necessarily reflect the opinions of National Bank or its subsidiaries. For financial or business advice, please consult your National Bank advisor, financial planner or an industry professional (e.g., accountant, tax specialist or lawyer).

Tags :

Categories

Categories