Landing your first job is a huge step towards gaining financial stability, and with the right moves, you can lay a solid financial foundation for yourself as time goes on. As financial advisors, we meet people at different points in their lives trying to make financial decisions, and it is our duty to guide and give them great advice.
If you’ve just landed your first job, we’ve put together five (5) financial planning tips from professional financial planners in Edmonton. These proven tips will help you make informed decisions and set yourself up for prolonged financial success.
Create a Comprehensive Budget
Budgeting can go a long way in helping you take charge of your finances. It’s not just another old trick in the financial books; it is a tip that works regardless of your financial standing. As someone who just landed their first job, budgeting how you would spend the money should be top of your list.
Budgeting doesn’t have to be complicated and intricate; you can make a budget simply to track how you spend your money and what you want to spend your paycheck on. Write down the amount of money you will receive as a salary and then categorize your expenses.
Include essential necessities like house rent, groceries, debt repayment schedule (if you have debts), transportation, self-care or entertainment, and savings. By keeping track of how you spend, you can make important financial decisions based on the information you have at hand and avoid unnecessary expenses.
Pay off your high-interest debts
If you have a debt you’re paying off, like student loans, car payments, or credit card debts, you should be thinking about how to efficiently clear them immediately. Why? High-interest debts tend to accumulate faster and become a long-term burden, so consider adopting some debt repayment strategies.
Effective debt repayment strategies to consider will be the Snowball or Avalanche method debt repayment methods to see which will help you tackle the debt systematically and comfortably.
Snowball Debt Repayment Method
The snowball debt repayment method is a strategy to pay off debt from the smallest to the biggest. Once you pay off the smallest debt, you move on to the next smallest and go on like that until you clear the debt.
To use this method, make a list of your debt from the smallest to the biggest, without regard for the interest, and pay a minimum amount on all your big debts. Then pay off the small debt with as many payments as possible and repeat until you pay everything off.
Avalanche Debt Repayment Method
The avalanche debt payment method is the opposite of the Snowball method. Here, you have to pay off the big debts first before the small ones. The idea is to tackle the big problem first before the small ones.
To use this method, pay a minimum amount for all the small debts and then pay as much as possible for the larger debts until you clear them.
Once you clear your debts, you can breathe a sigh of relief and focus on saving bigger for your future.
Set Up an Emergency Fund
You don’t have to wait till you’re planning for retirement or experience a life scare before you set up an emergency fund. Life can be very unpredictable so having an emergency fund can come in handy when there are unexpected expenses. The goal should be to save at least three to five months' worth of your living expenses in another account.
The fund in the separate account will be used as a safety net when unforeseen circumstances arise. You do not have to go into debt during your challenging times if you have this in place. If you’re unsure about how to separate your emergency funds from your earnings, all you have to do is decide on a percentage or, better still, see a financial planner in Alberta.
Start Saving for Retirement
You can never start saving money for retirement too early because the earlier you start, the more robust your retirement savings account will be. If your employer has a retirement plan such as the RRSP or something similar, you should take advantage of it.
Save a percentage of your income, especially if your employer offers matching contributions. Most people tend to relax, because their employer has a retirement plan in place but having a personal retirement plan drafted will be super beneficial for you.
You should consider opening a separate RRSP (Canadian Registered Retirement Savings Plan) for your independent retirement savings. RRSP accounts receive a tax deduction on the yearly contributions so that you can enjoy the many benefits of compounded returns.
Make Long- and Short-Term Investments
As expert Edmonton financial advisors, we always tell our clients about long- and short-term investments when they’re looking for investment opportunities. Once you can track your income flow, the next thing on your list should be to make investments. Start by learning about the best investment options based on the funds you have available.
Start by learning about the different options like mutual funds, and ETFs (exchange traded funds). Depending on your investment goals, a financial advisor in Alberta can provide clarity about which options suit your goals.
Investing can be very tricky, so it’s advisable that you seek guidance from a professional financial advisor in Canada, so that you can make informed decisions. Another thing that will be considered when developing your portfolio is your risk tolerance- this will also guide your final investment decisions.
Bonus Tip; Consult a Financial Planner in Edmonton
A financial planner in Alberta, Canada, has all the experience and expertise you need to make the best decisions for your finances after your first job. With an Edmonton financial planner, you’ll work with specific financial objectives and learn how to focus on your long- and short-term financial growth.
The purpose of seeing a professional is to gain clarity and create a smooth path to achieving your financial goals.
Individually, once you get your first job, start practicing financial discipline and learning how to avoid impulse buying. Also, draw up a plan to help you achieve your set financial goals, and you’ll find that you will hardly struggle financially at any point.
Don’t over-stretch your finances because building a solid financial foundation takes a while and it requires some discipline. You can learn and grow with paychecks from your first job, and as you expand, you’ll get better at making bigger financial decisions.
Reach out to us at Dehaan Private Wealth to speak with a professional Edmonton financial advisor. We have established ourselves as a trusted group for all things finance, so do not hesitate to contact us.