My first money management skills

A special thanks to TD Canada Trust for today’s sponsored post.

I didn’t really start thinking seriously about money until I was 21 or so.  Before that, I had the nebulous idea that saving was good, but debt was normal, and taking care of my money meant balancing those two things.  I had already done my part by racking up a lot of debt, including over $10,000 in credit card debt and several tens of thousands in student loan debt.  Haha… *hangs head*

Photo credit: via flickr

Photo credit: via flickr

At the time, I was working as a research assistant part time while going to school.  I had a great deal of respect for my manager – to me, she had everything: a car, a house, a husband, AND they both successfully kept up with the hobbies of playing music and horseback riding.  And she was only 30 years old!  We were talking about finances one day before heading out to lunch and she said to me, “I don’t even think about my savings.  I just have my bank put $50 a paycheque towards my retirement fund.”  I asked her what she meant, and she explained that she had an RRSP account and that each paycheque, the bank automatically put $50 into her RRSP and invested it in a mutual fund.

I was like, “Really?  That sounds… easy.”  *brain gears are turning*

And that was the start of my financial evolution – the idea that financial planning could be easy and didn’t require a lot of planning and struggle really appealed to me.  Prior to this conversation, my concept of saving was to try not to spend my entire paycheque and then put the remainder into a savings account.  But since that account was easily accessible, I’d often break into it for “splurges”.  I also had a hard time wrapping my head around retirement savings in particular… it seemed so far away.  The idea of automating it really appealed to me because then, I didn’t have to think about this scary, far away thing called retirement.

So later that week, I set up an appointment at my bank and created an RRSP account.  It really was easy!  It took less than half an hour and I let them choose an balanced growth mutual fund for me, set up an automatic contribution and I was off to the races.

Now, of course, my savings and investing is a bit more refined.  I’ve moved away from mutual funds and into ETFs and stocks.  I don’t have my nasty credit card debt anymore, though I still have my student loans.  But it all started with the realization that everyday money management could be easy.

For someone just starting out, I’d offer the following suggestions:

  • Make it automatic: Whether it is a contribution towards your savings or a debt payment, just automate it.  You’ll never forget a payment and you won’t even realize you’re missing the money.  Over time, you’ll get so used to seeing the savings go up (and the debt go down!) that you’ll be motivate to increase you savings and increase your debt payments.  It’s addicting!
  • Keep it simple: There’s no need to have complex formulas or tracking systems – I don’t track *exactly* how much I spend on food.  I just take out a certain amount of cash per month, and that’s all I get for groceries.  The more complications and requirements you introduce into your budgeting system, the less likely you’re going to stick with it.
  • Stuff happens: So keep a small emergency fund.  Depending on your situation (kids? rent? own? pets?), you might only need $500 in an emergency fund or you may need $5000.  For myself (no dependents, own a condo) I have $2000 to cover appliance failures, airfare, that sort of thing.
  • Stick to the basics: There’s no get-rich-quick scheme here.  You gotta spend less than you make.  If you do that, things will tend to work out in the end.

What financial advice would you give to someone who’s just starting out?

Posted in: Money

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