Young adults who take charge of their finances in 2022 can set themselves up for decades to come.
All they have to do is navigate an unusually receptive job market, expensive housing, continued COVID-19 risks, inflation, a bull market for stocks and the rise of crypto. For help with all of that, I asked the financial planners, investment advisers and others in my LinkedIn community for their top personal finance advice for young adults in 2022.
Here are some of the best suggestions, grouped by theme:
“Manage your career as actively as you would manage your [investment] portfolio. Learning is the most critical return on employment, but seek capital gains in the form of a job change, when it’s time to promote yourself.”
-Karen Thomson, Thomson Consulting
“When evaluating a potential job change, ask more questions about where you’ll be able to grow your career there and how much you’ll be able to be earning in two to five years, rather than just focusing on how much they’ll pay you today. Salaries are comparable at similar level jobs, but room for you to grow changes it from a job to a career.”
-Andrew Porteous, certified financial planner (CFP)
“Time to play offence on the job front. Negotiate a raise, apply for a stretch job at a competitor or in another field. Use inflation as the backdrop if you have to. Zero to 2-per-cent cost of living raises aren’t going to cut it. The pendulum has swung in favour of the employee now.” Note: A “stretch job” is outside your comfort zone, one you may not be entirely qualified for.
-Robb Engen, fee-only financial planner and blogger at Boomer & Echo
On saving for emergencies
“Although it can be challenging to come to terms with a sizable amount of cash earning next to no interest, an emergency fund keeps the rest of your financial plan intact by preventing you from liquidating investments at an inopportune time or accumulating credit card debt.”
-Jarrett Holmes, qualified associate financial planner (QAFP)
“Harvest any windfall gains made in speculative bets in cryptocurrency and growth stocks.”
-John Burns, CFP
“You don’t need to hop on every wealth-building train, but you do need to know enough about a few to maximize the benefits. Think high growth, but also think capital preservation. Diversification is your friend and rewards come over time.”
-Onyeka Okonkwo, assistant manager of risk and compliance at Deloitte (Nigeria)
“Create a saving habit, invest in low-cost vehicles (index funds) and focus on your career and building skills instead of chasing stock returns and the latest cryptocurrency.”
-Marcelo Taboada, chartered investment manager (CIM)
On home ownership
“Houses come at a stage where you have sorted three variables: regular cash flow, a job that you like and having an investing process in place.”
-Apurva Singhi, CFP (India)
“Do not get overextended by purchasing a home you cannot afford. There are still places to live in Canada with affordable housing prices. Make sure your Total Debt Service ratio is always below 30 per cent, even though your bank can approve mortgages up to 40 per cent TDS.” Note: TDS means mortgage plus other housing costs and debts as a percentage of gross income.
-Sheldon Craig, CFP
On debts and credit scores
“Develop a monthly budget. To do that, keep track of discretionary expenses for at least two months. Pay off higher interest debts first. Curtail spending on restaurants, Uber Eats and alcohol. If overwhelmed with debts, seek professional help to understand your debt options.”
-Linda Stern, licensed insolvency trustee at Crowe Soberman
“Pay your bills as soon as you get them. This will avoid forgetting about paying them, which negatively impacts on your credit reports. Create a spreadsheet (or simply use a calendar) to show future pay dates and amounts, and the same for rent/utilities/bills/credit card amounts.”
-Michael Abramczuk, certified public accountant (CPA)
“Smartphone contracts are credit arrangements ... there’s no such thing as a zero-dollar iPhone – it’s actually a payment plan and can impact your credit score.”
-Stephanie Dean, manager of financial literacy at RBC Wealth Management
Specifically for women
“Start now, invest more of your money, and invest it in diversified portfolios with higher expected returns (more equity exposure). Understand that a woman’s average financial life is likely to be very different from the average man’s.”
-Kristine Beese, founder and CEO at Untangle Money
Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.