As you move through life, it’s important to be ready for some of the money milestones that matter most. Planning your finances can provide you with security for your future, and it ensures that you are able to accomplish your most important goals.
Don’t find yourself falling behind. Here are a few money milestones to plan for:
1. Build good credit
One of the first money milestones you need to hit is that of building good credit. Your credit influences so much about your financial future. Your credit can mean lower costs for insurance, as well as help your ability to get a good deal on a car loan. You can’t even think about buying a home unless you have good credit.
The easiest way to start building good credit is to use a credit card responsibly. Use a credit card responsibly, and you will have a credit history that can allow you to qualify for other financial products at low costs and good rates. The foundation to your future finances is good credit.
2. Your first car
I remember the first car I bought on my own. I was in college, and my parents had to cosign for me (luckily, I had proved myself reasonably responsible, so they weren’t too worried). I saved up money for a down payment, and financed the rest of the purchase with a low rate car loan.
Not only can your first car be a great tool for getting to and from work, and establishing independence, but it can also help you as you continue to build credit. Your credit includes the types of loans you have. If you have a credit card (revolving credit) and a car loan (installment credit), you show that you know how to handle different types of credit. This helps your credit situation at the same time it helps you reach your money milestone of buying a first car.
As you get your car, remember that you have other responsibilities that come with it. You will need to purchase auto insurance to protect yourself and follow the law.
3. Should you buy or rent?
Moving out and living on your own is one of the main money milestones many of us think about. At some point, you might be hoping to buy a home. This means saving up for a down payment and getting a low-rate mortgage to cover the cost of buying a home.
If you decide you want to buy a home, it’s vital that you understand the importance of the new down payment rules. You will need to plan ahead and save up for a bigger down payment if your home costs more than $500,000. This requires planning ahead, and making sure that you understand your goals.
However, you don’t have to decide to buy in order to get ahead. I like renting, and have no intention to buy a home again. Deciding whether to buy or to rent requires that you sit down and consider your financial situation and your lifestyle preferences. Being able to rationally think through the options and consequences shows money maturity on its own.
4. Start investing
One of the most important money milestones you need to hit is to start investing. Investing is a big part of building long-term wealth. As soon as you start making money from your first job, you need to start investing.
Canada offers a number of great options when it comes to tax-advantaged investing. The RRSP is an amazing resource for you. You should begin investing with your RRSP as soon as you can. Even if you think you don’t have enough money to start investing, the reality is that you do. The earlier you start investing, the more chance you have to build wealth with the help of compound interest. You don’t want to miss out on the opportunities that come with investing as early as possible.
Also, don’t forget the TFSA, which is another great financial resource. The TFSA is very flexible, offers tax-free growth, and allows you another vehicle to save for your future. Don’t delay your investing; you can start today to grow your wealth for tomorrow.
5. Save for a wedding
While not everyone makes getting married a priority, it’s definitely one of those money milestones that many of us think about and work toward. I know that I worked hard to have a debt-free wedding by saving up ahead of time and by doing some of it myself.
Now that my own marriage is over, I’m not sure that I will ever marry again. I could decide to go that route in the future, I suppose, but it’s not a priority for me. However, if it ever becomes a priority again, I will definitely plan ahead and save up for my wedding.
6. Don’t forget about kids
Once again, this is one of those money milestones that not everyone cares to hit. However, if you do want kids, it’s important to plan ahead for them. Raising kids can be more expensive than you think, but there are ways to reduce the costs and save money.
However, you do need to pay attention to what you’re paying and look ahead to what you might be able to afford. Another consideration is whether or not you want to help your kids pay for school. Canada provides some great options, such as the RESP. You can start saving with the RESP, and combine that with the Canada Education Savings Grant to get the best bang for your child’s education buck.
If you start as soon as possible, you can save for your kids, and you can help them save money on a college education.
If you want to succeed as you reach for your money milestones, you need to plan ahead. Think about the lifestyle you want to live, and figure out what it takes to get there. Whether your goals include more travel, saving up for a down payment, or securing your long-term financial future (or doing all these things at once), it’s vital that you plan ahead and save up. No matter what your future holds, success depends on knowing your priorities and then making a plan to save up for them.