This is a guest post by Genymoney.ca, a website dedicated to personal finance for millennials with a focus on investing, saving money, and living a meaningful and minimalist lifestyle.
I remember the feeling when I got my first real job after graduating from university. Finally, after all those years of hard work, I was getting paid real money (and not just working-in-a-mall kind of money).
I had money coming in and I wanted to invest it, I didn't want it just 'sitting there' in my bank account. It was a lot of trial and error and bad investments (flow through shares, buying stocks that were headed nowhere). I've learned my fair share of financial lessons.
Here are some key things to do once you get your first real job so that you can get a head start towards financial independence, possibly early retirement (if that's what you want), and wealth building so you can get rich in Canada and be glorious and free.
Start Stashing Money Away In a HISA
Paying yourself first is the probably the most important thing when you get your real job paycheques coming in regularly. Instead of budgeting, which often makes you end up feeling disappointed (much like dieting), pay yourself first and hide the money from your main chequing account.
You want to move that money out of your primary chequing account (be it with one of the big banks when you signed up for that free iPad or $300 cash) into a high interest savings account that will be difficult to access, for example, if it is an online only bank account.
I know when I was in my early 20's, I wanted to buy a home. If you have a short timeline (think less than five years) when you need your money, it is best to put your money away in a safe place like a GIC or high interest savings account.
One of my favourite high interest savings accounts that doesn't have a gimmicky temporary interest rate is EQ Bank. They have one of the highest interest rates in Canada and it functions as a hybrid chequing and savings account. Within EQ Bank, you can also label different accounts within your high interest savings account for different goals, for example, that five week trip to Africa to see Mt Kilimanjaro, the house or condo fund, or emergency savings.
Start Tracking Your Net Worth
Before I even started my 'real' job I always tracked my net worth, even when I was in university. You don't know where you want to go until you know where you are coming from.
A net worth tracker I recommend is Wealthica. It's free to sign up for.
Wealthica allows you to track your net worth and link your bank accounts and investment accounts so you can see all your investments in one place. Even if you have different bank accounts, even if you have different investment accounts with different companies, you can see it all in one place. Wealthica is one of my favourite personal finance apps in Canada.
For money that you don't need right away within the five year timeframe, you should start investing and saving for your retirement. The best thing about being in your 20's is having time on your side to invest in the stock market.
Prioritize your TFSA and your RRSP, and once you max those out, start contributing to your non-registered investments.
ETF investing via the DIY investing discount brokerage route is the way to go because of the ridiculously low cost of it, and Passiv can help make it easier for you.
Fees erode your return. If you're paying 3% in mutual fund fees on a 6% annual return, how much are you really getting? 3%. Not very much, I know. That's why it is important to reduce the cost of your investing.
Here's a step by step guide on how to open up an investment focused TFSA with Questrade.
Figure Out Your Employer's Pension Plan
Do you have a defined benefit pension or a defined contribution plan pension?
Does your company match your contribution?
How much is deducted from your paycheque and what percentage of your gross income are you contributing to your pension?
Does your company have a stock buyback program? If so, might be a good idea to diversify out of this and not have all your eggs in one basket.
Knowing this information when you start working in your company early on is definitely an asset. I could have bought back my pension (my 6 month probationary period) when I first started, but it was too late by the time I realized I could buyback as it had been over five years.
Side Hustle or Passive Income in Your Spare Time
I'm not sure about you but my job doesn't define who I am, even though I've been working at the same job for over 15 years. To me, it's a career and pays the bills. It also provides income so that I can reach financial independence and spend time on things that truly matter to me (like my family).
One thing that really helped me avoid burnout from my job is having a side hustle and continuously working on generating passive income.
When you are bored at your job, doing something else after work (energy permitting) to generate income helps you feel less tired about work. It provides an escape from your job.
Most importantly, knowing that your income streams are diversified is a real boost to your self esteem and strangely enough, helps you not feel as much imposter syndrome with your main job. It gives you a sense of feeling carefree and confident because you know you have other income coming in.
Starting Your Career Feels Great
The boundless optimism and excitement when you head to work feels great. You have lots to learn and want to keep advancing and getting promoted at your job. If your job doesn't feel like work, then you have it made!
However, if it does feel like work, working on these five things:
- Put money aside in a high interest savings account
- Start tracking your net worth
- Start investing (even if it seems scary)
- Figure out your pension plan
- Side hustle or work on passive income
Doing these things will help you get ahead so that 15 or 20 years down the road, you can have a work optional lifestyle if that's what you are aiming for.
What other 'personal finance things to do' do you think is important once you start your career?