Being on your own for the first time is an exciting step in any young person’s life, but it also comes with increased responsibility. Making and sticking to a budget, taking care of insurance needs, and being prepared for the unexpected all come with the territory, and the learning curve can be sharp. By being prepared, you can make the adjustment easier and less likely to turn to Mom and Dad in need of financial help.
Handling Money and Setting Financial Limits
Creating a monthly budget is an essential first step towards financial responsibility. Here’s a breakdown of how to do it:
- Create a list with two headings: one for your income, and one for your expenses
- If your income varies due to changes in the number of hours you work from week to week, keep your estimates towards the lower side and as close to the minimum as possible
- Do the same with your non-fixed expenses, but here, keep your estimates higher and as close to the maximum as possible
- The amount of money that’s left over after subtracting your expenses from your income is your disposable income
- Assign as much of your disposable income as possible to savings
- Spend what is left responsibly, and carry any extra money over to the next month or put it in a “contingency fund” for emergency expenses
Next, consider your financial goals. Are you saving up for a major purchase? Do you want to buy a car or a house in the near future? If so, set a monthly savings goal, add it to your expenses, and most importantly, don’t touch the money unless it’s a matter or life or death.
Building a “Reserve Fund”
Going back to the importance of having a contingency fund, it’s important to be fully aware of all the new types of risks you’ll face out on your own. Ask any insurance professional, and they’ll tell you: accidents happen. A lot. You need to be ready, especially if you own a vehicle.
To that end, take a moment to review our best practices for developing money-saving driving habits and tips for trimming back on other expenses if you need to draw blood from a stone to pad your savings.
Insurance Is an Asset
Most people don’t think of it this way, but life insurance can essentially double as a form of savings, and depending on your income level, this can actually be advantageous from a tax perspective. It’s especially essential if you have a family, as it provides effective protection and peace of mind. Talk to an insurance professional about your options if you’re in a position of need.
If you’re renting, you should also seriously consider carrying tenant insurance. These policies are relatively inexpensive, but can save the day if an accident or crime results in damages or losses.
If you’ve purchased your own home, you’ll definitely be carrying insurance but will have to choose between actual cash value (ACV) and replacement value (RV). This is a big decision, and it can have a significant impact on your financial future, so if you’re not familiar with these terms, here’s a primer to get you up to speed.
Whether you’re going on an out-of-province road trip or a globetrotting adventure, travel insurance is another must. One mistake a lot of young people make is thinking their provincial health insurance plan covers them no matter where they go, or that they’re not going to need medical attention while they’re away.
The reality is very different from these misconceptions. Your provincial health insurance plan will only offer very limited coverage if you’re out of province, and won’t cover you at all out of the country. You’ll be responsible for the difference if you’re uninsured. Accidents are also more likely to occur in unfamiliar places, so don’t take unnecessary risks with your activities or with your insurance coverage.
Trust Lane’s for Great Advice on Calgary Home, Vehicle and Travel Insurance
Many young people have questions about insurance, and if you’re one of them, don’t hesitate to reach out to the caring professionals at Lane’s Insurance. You can count on Lane’s for great rates on auto insurance, home insurance, and all the other coverage needs that come with each stage of life.
To learn more, please contact Lane’s Insurance.