Starting your professional career comes with lots of difficult money decisions. Having a steady stream of income for the first time is a great feeling but knowing what to do with the money can be confusing. Below are 5 strategies that all young professionals should employ to make sure their finances stay on track.
What You Need to Know
1. Prioritize Income
As a young professional you have time on your side and your earning potential is your greatest asset. Maximizing income should be a top priority. Putting in extra hours at work or even picking up a side gig to supplement your income can help you get ahead financially and put you on a path to financial security.
2. Automate Your Finances
Automating your investing accounts is a great way to start (and continue) investing. Handing over large sums of money to an investment can seem overwhelming when you are just getting started. Automatic deposits can be set up to come out of your bank account in regular intervals and are automatically invested. This method of saving is an effective long-term wealth accumulation tool and should be utilized by all young professionals.
3. Prioritize Debt
Eliminating debt should be your number one priority. Student loans, credit cards, and credit lines will only become costlier and more daunting as time goes on. Get into the habit of allocating a certain percentage of your pay cheque to paying down debt and stick with it. Remember: it is possible to start saving while paying down debt. Talk to a financial advisor on how to balance both.
4. Insure Yourself
Getting insurance while your young is very affordable and perhaps the one of the most important financial moves you can make. Life, critical illness, and disability insurance will protect the lifestyle and financial plans that you will spend so much time executing. Nothing derails your finances like an illness or disability. Putting safeguards in place now will ensure you stay on track, no matter what.
5. Live Below Your Means
Living with a little less than you can afford will ensure you never find yourself in a financial pinch. For example, if you make $5000 a month but live on only $4000 a month, that leaves $1000 to be put aside for your future or unexpected expenses. Over time, that’s going to be a significant safety net and the peace of mind that comes with it will be the reward.
The Bottom Line
Doing a little planning today will pay off in the future. Prioritizing financial commitments can be a little overwhelming and it can be hard to know where to start. Talking to a financial advisor can help you identify the goals that are most important to you and put a plan in place to reach them!