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5 Tips for Financial Success When You’re Starting Out

Wednesday, July 08, 2015

Five Ways to Start Out On The Right Foot Financially


It is a significant responsibility to be financially independent. To continue do so successfully will require that you develop self-sustainable habits. You may be moving out of your parents’ home for the first time for post-secondary education, moving away to begin a new life, finding work or starting a new job in your desired field. You may be sharing a place with a roommate, living alone as a tenant, moving in with a partner to share expenses or buying a new home. In some cases, you may be moving directly from your parent’s home into a matrimonial home. Whatever your situation is, how you care for your finances will be an important matter and the faster you figure out how to best manage them, the better. Here we provide 5 tips that will help you in planning your move to become financially self-sufficient.

#1 Create a Budget

The best way to handle your finances is to create a budget so you know your discretionary spending limits and avoid getting into debt. It is best to prepare it before you move out or as soon as possible thereafter. The budget should show your monthly income, essential expenses, discretionary spending preferences and how much you can expect to have left over after covering monthly costs. The initial purpose of creating a budget is not that you are setting yourself up to make do with less, but rather so you can see how you are faring, to identify any danger signals, and to see if there are funds left over that you can use to save for a special event or purchase, or for an emergency or an investment. You won’t need to live frugally for your entire lifetime, but what you save matters nearly as much as what you earn. Once you have a budget in place, then you can assess monthly whether you are headed in the direction you desire or if you need to spend more carefully to remain self-sufficient or to achieve certain goals.

#2 Create an Emergency Fund from the Outset

Whether you are single or have moved in with a partner, create and set aside an emergency fund. In case you need money immediately, you won't have to ask to borrow from friends, parents or siblings. Make some saving a non-negotiable task (meaning, whatever expenses you incur in a month, you must put the pre-determined sum of money into your emergency fund). Don't keep this money at home as it will be too tempting to spend; it's better to put emergency funds aside in a deposit or savings account.

#3 Be Conscious of Your Stressors and How You Tend to Handle Them

When you are living outside your parent’s home, you will have new responsibilities and stressors. You may enjoy that no one will require you to do chores, or clean up after yourself but you will also have the stressors of being responsible for yourself. We all know that too much stress is bad for us and that many positive events are forms of stress (e.g., moving out, beginning a new school program, starting a new job, beginning a common law relationship, having a baby). Knowing how you tend to respond to stress can help you to respond differently and better.

Common methods of coping with stress and overload including eating, smoking, drinking, insufficient sleep and exercise, and shopping. Shopping may provide temporary relief but is bad for you financially and it can lead to financial stress. Eating poorly and short-changing your sleep and exercise while spending on drinks, smoking and entertainment is not workable in the long-term and is best avoided as it is hard to get out of once you are in it. Simply taking some time for yourself, by contrast, can help to rejuvenate you and go a long way in keeping you independent and happy.

#4 Regularly Monitor Your Accounts

When you were under your parents' care, they likely handled the bills for you and controlled your spending. When moving out on your own or in with a partner, you will have to take care of your financial costs without parental assistance. This includes paying attention to how much is due, when it is due, and and whether you have enough in the bank to cover cheques you wrote or automatic payments you signed up for. It is easy to succumb to the temptation to spend more than you earn when no one is watching you manage your funds.

If you and a partner are merging finances, it is best to do this carefully and under watchful eye. Working together as a team with your finances has emotional benefit and joint responsibility, but it is important not to merge too quickly or to lose sight of your joint finances if only one of you manages them. Most couples are not completely up front about their finances and may try to hide assets or spending from each other. Conflicts can arise when couples with opposing money personalities (e.g., a spender and saver together) tie their spending habits to a shared pool. It may be ideal to leave a few assets separate or at least maintain separate accounts for discretionary spending so that each person can use their amount as desired and avoid conflict.

#5 Be Open and Honest About Your Financial Matters

When you apply for a mortgage, the bank or the mortgage company will require that you disclose your income. Do not hide any money problems or other monetary issues from the financial institution, your partner (including any student loans or credit card debt) or Canada Revenue Agency. Your financial institution will learn of your financial status when conducting a credit check for a credit card, loan or mortgage and if your partner learns of your financial difficulties after debts have been incurred, it can lead to significant disputes.

Whether you are staying alone or with a partner, you will have many responsibilities and challenges in your efforts to become financially independent. Following tips on how to start out on the right foot financially can help you significantly. At Abakhan & Associates Inc., we have your financial interests in mind. Our services include credit counselling and debt help to enable you to avoid bankruptcy. We have five bankruptcy trustee offices in British Columbia to serve you, including Vernon and Prince George, Surrey and Victoria.

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