Managing cash flow and making the move from student to young professional is an exciting milestone. After years of schooling, it’s your chance to finally get real-world experience, make important connections and put your skills and knowledge to work. At the same time, it can also feel quite intimidating, especially since it’s the first time most people start earning a steady income. For many young professionals, learning how to protect this newfound cash might seem overwhelming or unnecessary. But by taking the time to learn and plan you can very easily build a strong foundation for ongoing financial success.
Yes, the first item on the list is the dreaded ‘B’ word, but only because it is so important for your financial health. Managing cash flow requires you to know where your money is being spent and to ensure it is being spent wisely. When you start getting paycheques bigger than you’ve ever seen before, it can be tempting to increase your spending on things you don’t need. That’s why it’s important to understand that over time even little expenses will add up. By tracking your spending and staying within a budget you will easily put yourself on a path to financial security.
According to RBC, 48 percent of young Canadians want to make reducing or eliminating debt through regular payments a priority but struggle to balance short-term and long-term saving. While long-term saving is important, your debt only ends up becoming costlier over time so make it your number one priority. Whether it’s a credit card, student loan or line of credit, you should allocate a certain percentage of each paycheque to paying down your debt.
One important part of managing cash flow is learning how to accumulate wealth. If investing feels like a foreign concept or if you can’t afford to set aside lump sums, automatic investing can help. When you set up an automatic investment a set deposit will come out of your bank in regular intervals and be automatically invested. Since you can choose the amount taken out and increase as necessary, this is a great way to start accumulating wealth.
As a young professional one of the biggest assets you have on your side is time. Having extra time in your 20’s and 30’s gives you the chance to maximize your income earning potential. If managing cash flow on your current salary is a struggle, supplementing your income is an alternate option. Whether it means putting extra hours in at work or dipping your toe into the ‘gig economy’, being young and having more time gives you the opportunity to increase your income if you need to.
Taking the time to implement these four measures today is something that will pay off big time in the future. If you want to learn more about managing cash flow as a young professional, talking to a financial advisor is a great way to help you get and stay on track.