First “Real” Job
When I took my first job after university, I was earning peanuts, worried about paying down student loans and trying to figure out what came next. Looking back in time, I would have recommended the following steps to the younger, thinner me or congratulated my taller, darker-haired self for the things I did do right:
- Start learning about financial planning, as the earlier you start, the easier you make things for the current and future you. I would have purchased a copy of Taxes for Dummies and more carefully read the copy of The Wealthy Barber my dad got me. Understanding taxes allows you to take steps now that can mean significantly bigger tax refunds now and later. Understanding how time is on your side if you start saving for the future now can help influence early decisions such as how much to spend on a new car vs. putting away money for rainy day and setting a monthly budget.
- Pay down student loans and keep new debt to a minimum. After years and years of basement suites, public transit and dinners out at Subway, it was very tempting to try to catch up on lost time, especially when my new and improved credit card arrived and I first became familiar with the term “purchase financing.” While I do believe that it makes sense to loosen the purse strings a little bit (who knows how long we actually have?), I also believe that it makes sense to live well within your snack bracket and avoid the temptation to buy all those things we just can’t live without that will financially handcuff the future you. It was a great feeling when I paid off my student loan and car loan ahead of schedule and a bit of financial flexibility crept back into my life.
- Start putting away money for emergencies. Once I had enough in the bank for about 4 months of expenses, I noticed that it was a lot easier to breath and I wasn’t as upset when those unexpected bills reared their ugly heads. It also felt wonderful to no longer feel like I was living paycheque to pay cheque.
- Get ample disability insurance, extended medical, critical illness insurance and / or long term care insurance as possible through work or privately. Despite feeling bullet-proof and immune to all forms of injury and disease, the reality is that my biggest asset at that point was my future earning potential and the chances of getting disabled at some point in my working career for a significant period were extremely high. Even though our bodies may be more forgiving when we’re young, the statistics still indicate that we’re still extremely prone to disability. Moreover, health care insurance are both related to health and age. Getting coverage when you’re young means having protection when you haven’t had a chance to accumulate your own savings, knowing that you will still be getting some type of income even if you can never work again and the comfort of having coverage in place even if your health changes later and you would no longer be able to qualify.
- Start investing a little bit for the future, as my dad encouraged me to do. To me, starting small is like learning to ride a bike with training wheels; it means less chance of crashing in the future when the training wheels come off and that stakes are higher. It also helps demonstrate how hard it is to accumulate savings, which can also help prioritize your current spending decisions. I find that it is also habit-building. If it is done automatically each month, most people don’t even notice a difference to their daily finances. Finally, the earlier you start, the more time your money has to grow. Assuming the investment gods cooperate, putting aside even a little when you’re young can mean a big difference down the road when you’re wearing a different pant size.