Your Financial Future
“Money is the root of all evil” is not the full story. In fact, the old proverb is oft repeated incomplete; it is actually “The love of money is the root of all evil.” Those three words are paramount. When considered reasonably and given weighted importance with what matters most in your life, finances are something you want to start thinking about right away.
Tax-Free Savings Accounts allow you to put money away and let it accumulate interest without having to worry about taxes. The government allows a limit each year for you to add to the account. If you are older than 18 and have not taken advantage of this yet, those amounts carry forward. You likely have a limit of tens of thousands of dollars. As you get older and advance in your career, you will likely switch over to Retired Registered Savings Plans, or RRSPS, for short.
TFSAs are more ideal at this stage because the funds can be accessed much easier. RRSPs are, as their name suggests, ideal for your retirement as you pay tax on the money when you withdraw it. Your income bracket in retirement will be much lower, meaning the same can be said of your taxes. One thing to remember is your RRSPs are not required to be withdrawn only upon reaching retirement. If you decide to take a year off work to study, travel, or write a book, you can withdraw the savings just like you would when retiring. However, savings are also not the fully story.
“It’s not what you earn; it’s what you spend.” My dad told me this over and over as I grew up, and still throws it into conversations the odd time to this day. The endless attention placed on saving is greatly valuable, but can also be misleading. When you neglect to nurture the other half of the finances equation, your savings prowess is at the mercy of your spending habits.
For one week, make a list of every single cent that you spend. You might be surprised how the little expenses can add up over time. In a world of tapping cards and paying with our phones, it is easy to lose track. As life builds in complexity, so do your finances. By the time you are juggling a multitude of monthly expenses, you will be glad you built good habits back when you could count monthly costs in your head.
Figure out the life you would like to live. This should be the ideal balance between having things that will bring you happiness worth the effort and discarding efforts not worth the result. How big of a place do you need? Will you take vacations? Eat out a lot? Is a car of great benefit in the area you live, or is the public transit system adequately robust to get you around? Be honest with yourself, and remember that your answers can and likely will change over time.
Fontinelle, Amy. 8 Financial Tips for Young Adults. http://www.investopedia.com/articles/younginvestors/08/eight-tips.asp