Imagine meeting a new suitor…tall dark and handsome, professionally employed and witty to boot. Sounds perfect, right? Then the ball drops. “I live at home”. While this may seem alien to our friends, for South Asians this is a perfectly normal scenario. Often, unless working far from home, working young people live at home (often rent free) until they get married. Whilst this may put a damper on your dating life, from a financial planning point of view this is an unmatched savings opportunity that won’t be replicated and can help you set yourself up for financial freedom at an early age!
The opportunity to live rent free while earning an “adult” income is a chance not afforded to many. While you are enjoying financial freedom, there are a few things to keep in mind.
Not every young adult had the financial banking from ‘bank of mom and dad’ while going to school. Often tools such as student loans are used. High interest credit cards get racked up to sustain you during your student years. Living at home for free? Get rid of the debt. Channel as much income as possible into putting yourself into a debt free position, so you can set yourself up for bigger debt in the form of a mortgage down the road! #jokingnotjoking
Savings during this time is often neglected which is very unfortunate. I often see young people trying to keep up with the Gills (luxury cars, designer handbags, and a diet consisting almost exclusively of things found on a Cactus Club menu) with your newfound higher income and relatively low costs of living. This leaves most with the illusion of a higher level of disposable income. Savings is often the last thing on one’s mind at this point but I would suggest this is the time to channel the savings discipline of our immigrant forefathers and live below your means, putting as much money as you can away for the future.
Insurance is a key piece often missing from a young person’s planning because it won’t happen to you. Will it? I certainly hope not. But I hope for a lot of things, not all of which come true (cue tall dark and handsome witty professional from before!). The best time to get insurance is when you don’t think you’ll need it, like when you are young, healthy, into a new career and on top of the world. Insurance advisors are great at painting the worst case scenario to clients, to make a point. In our defense we often see the worst case scenario panning out and how insurance has helped. You’re young, you’re healthy, and this is the time to commit to life insurance. You may not hugely need it now, but you will in the future and may not qualify medically at that time. My rule of thumb is to purchase as much disability insurance as the insurer will give you (this is an income tested amount), and as much critical illness coverage as you can afford.
With these few tips in mind, hopefully you are able to kick start a financial future for yourself by taking advantage of a living situation that is often not afforded to many. Here’s to a good financial future!
Bharathi Sandhu works with Raymond James Ltd. The views of the author do not necessarily reflect those of Raymond James Ltd. Information is from sources believed reliable but cannot be guaranteed. This is provided for information only. We recommend that clients seek independent advice from a professional advisor on tax-related matters. Securities offered through Raymond James Ltd., member of the Canadian Investor Protection Fund. Insurance services offered through Raymond James Financial Planning Ltd., not a member of the Canadian Investor Protection Fund
