# 25 years old - advice for financial freedom



## Dimpled Balls (Jun 8, 2020)

Hi everyone,

I figured that making a post on here would be beneficial to get some advice and tips on my journey as someone who is in my mid-20's. I'm at a point in my life where I am very focused, consumed and driven to work hard, continue building a career and achieve financial freedom in the future. Here is my current situation:


25 years old - serious girlfriend - 3 years into working from university graduation.
I have roughly 50k in savings with no student debt.
Minimal expenses (living at home) - I pay for my gas, car insurance, phone bill and am rent free for now.
Earn around 70k per year - should be going up as I will be getting a promotion in December/January.
Goal is to save $2500 per month. 
$500 on my credit card.
I am in a career where owning a franchise model is a potential opportunity. I will need equity for this. As I continue to get older and grow with my girlfriend, moving out is obviously in our near future too. 

Any tips/advice/recommendations would be great. I know this will be the perfect place to track my goals and progression. 

Is putting my money away in safe ETF's the way to go and letting compound interest lead the way? I am all about the long term goal and looking at where my money will be when I'm 50-55 years old. 

Thanks all!


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## james4beach (Nov 15, 2012)

I'm in my late 30s and have a few suggestions.

First piece of advice is that the current economy very much favours workers. So *push hard* *for higher pay*. That could mean a raise at your current job, but also look at other jobs, get other offers. Often, switching companies is the best way to boost your pay. Your pay MUST increase this year, otherwise you are falling behind inflation.

My second piece of advice is to watch your expenses. They're obviously very low right now (so maybe ignore your current special case). But once you've moved out, maybe are in a 1 bedroom apartment, keep a close leash on your expenses and monthly spending. The reason I say this is that I've seen many people's costs of living really take off like crazy once they have a good salary.

It's really easy to spend lots of money and I think it's pretty important to use methods like monthly budgeting, or tracking your expenses. Without these controls, your spending could dramatically increase every year and I think that's very common for a lot of people. If you don't control spending, you can put yourself in a position where it becomes impossible to achieve financial freedom.

And IMO controlling your spending is going to make a bigger difference in achieving financial freedom, than your specific investment choices. So while investing is important, I think the biggest factor in getting ahead (at your age) is limiting your spending, and making sure you don't get into an expensive lifestyle pattern.


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## cainvest (May 1, 2013)

I think at your stage of the journey it's just about saving money and buying investments based on your risk tolerance.


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## KaeJS (Sep 28, 2010)

How much equity will you need for the franchise option?


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## milhouse (Nov 16, 2016)

cainvest said:


> I think at your stage of the journey it's just about saving money and buying investments based on your risk tolerance.


+1
Savings drive the bulk of one's portfolio growth in the early days versus investment returns so you don't need to hit a home run, just avoid large mistakes.
And managing your spend obviously ties into savings.



james4beach said:


> So *push hard* *for higher pay*. That could mean a raise at your current job, but also look at other jobs, get other offers.


+1
To state the obvious, higher income provides flexibiltiy to meet savings goals while still having some left over for fun.


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## scorpion_ca (Nov 3, 2014)

I saved some money from 2009 to 2013 but it didn't grow at that time. You need to save and keep growing your money. This is what I would do if I were in your position.


Read personal finance and investment related books & blogs to improve financial knowledge.
Keep four months of emergency fund in HISA
Save more and delay gratification until 40
Invest in all in one equity ETF such as XEQT or VEQT
You don't need bond/fixed income or Crypto/NFT in your accumulation stage to be successful in investing


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## Tostig (Nov 18, 2020)

Congratulations for thinking so far ahead at such a young age.

If you're into saving and cutting expenses, the most obvious is to ditch the car. Insurance and gas are heavy hitters. And then there's parking when you go out. Get a bike or ebike. Next, consider shopping for a lower cost phone plan if you have a smart phone or cellphone.


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## londoncalling (Sep 17, 2011)

Depending on location, distance from GF and work as well as alternative transportation options ditching the car may not be a viable option. Also, if the car is already paid for and isn't a lot to maintain it may not make financial sense to switch. However, if in a large urban centre a car is a huge expense.


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## Dimpled Balls (Jun 8, 2020)

KaeJS said:


> How much equity will you need for the franchise option?


125k in equity.


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## Dimpled Balls (Jun 8, 2020)

scorpion_ca said:


> I saved some money from 2009 to 2013 but it didn't grow at that time. You need to save and keep growing your money. This is what I would do if I were in your position.
> 
> 
> Read personal finance and investment related books & blogs to improve financial knowledge.
> ...


Are there any particular books you recommend?


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## Dimpled Balls (Jun 8, 2020)

Tostig said:


> Congratulations for thinking so far ahead at such a young age.
> 
> If you're into saving and cutting expenses, the most obvious is to ditch the car. Insurance and gas are heavy hitters. And then there's parking when you go out. Get a bike or ebike. Next, consider shopping for a lower cost phone plan if you have a smart phone or cellphone.


Thank you - it is on my mind 24/7 about what I can do to get the most out of my fortunate position at the moment.


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## Dimpled Balls (Jun 8, 2020)

londoncalling said:


> Depending on location, distance from GF and work as well as alternative transportation options ditching the car may not be a viable option. Also, if the car is already paid for and isn't a lot to maintain it may not make financial sense to switch. However, if in a large urban centre a car is a huge expense.


Car is paid off - bought it in one shot and need it for work + GF. I would consider subway/bus as a mode of transportation but I am always in and out of the city.


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## londoncalling (Sep 17, 2011)

Dimpled Balls said:


> Are there any particular books you recommend?


It's been awhile since I looked at this thread but it should get you started in the right direction.

Eight with Weight: A Reading List for New Investors | Canadian Money Forum

Added

here is another link to additional resource reading list.

Best Personal Finance book for getting started (in the Canadian context) | Canadian Money Forum

I can assure there will be no shortage of information for those who seek it and put in the time. Enjoy the journey. You are in a good position as time is on your side.


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## Dimpled Balls (Jun 8, 2020)

londoncalling said:


> It's been awhile since I looked at this thread but it should get you started in the right direction.
> 
> Eight with Weight: A Reading List for New Investors | Canadian Money Forum


thank you, I will have a read.


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## banjopete (Feb 4, 2014)

Congrats, if you're thinking about things like this at your age you're well on your way to long term financial health. Two things I haven't seen mentioned yet are how/where you're saving your funds, and the second is trying to keep your life in a small area. Definitely take advantage of your RRSP contribution, and TFSA contribution amounts if you're putting away that much cash monthly you'll be able to max those out each year which is a powerful tool. In case somehow this isn't already on your radar, RRSP contribution will reduce your taxes owing at tax time and with the amount you could put in will likely mean you'll get a very healthy tax return year after year which will allow you to put even more money into savings. RRSP's are a tax deferral but they can be a powerful tool, and are useful for home purchasing, even for funding returns to school it desired. TFSA's are another shelter for your funds and just like RRSP you can buy and hold investments in there where they can grow free of care for taxes, and income implications in the long run. Get to know these things if you don't already, and take advantage of all your workplace contribution matching programs for these if you have them.

The other life in a small area is touching on the ditch the car idea that was raised earlier. Car's suck, traffic sucks, and the costs for cars add up significantly over a life time. If you can live close enough to where you expect to work the time and cost saving for active commutes (run/bike/skate/scooter/walk) or public transit are significant over a working career. Other bonuses are better mental health, better physical health, and you'll add time to your life outside of work by skipping dumb and long car commutes. If home owning close to where you work costs more, it's still very likely that in the long run those additional costs are worth it. A lot of people get sucked in, and then end up with the "I need a reliable car because of my commute" then end up perma car payment'ing and spending tons of money on gas, insurance, and car payments over a working career.

Last minor comments, never carry credit card debt month to month, for sure use them, but never pay the interest penalties. I'm not a fan of emergency cash. Have a line of credit ready, and if you ever need emergency cash that can be it, otherwise keep your saved money working for you (invested) and enjoy.


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## Plugging Along (Jan 3, 2011)

@Dimpled Balls I think you are in great shape already. You are doing everything right. My advice for young people is always the following -
1. Work on your career and earning potential as much as possible now. Learn as much as you can, try different areas, move around etc. What you do before you settle down (marriage and kids if you decide this route) will have a huge impact more than how much you save at this point.
2. Spend less than you make - you are doing this already. You have the advantage of living at home, so save up as much as you can. Without student debt, and living at home, you have a much higher % of disposable income.
3. Keep learning to invest. If you aren't comfortable yet, invest in what you know, even if it's conservative.
4. Learn what adds value and enjoyment to you life now, so you are spending on what brings you the most value. Alot of young people think its about stuff, I find its about memories. We spent money on stupid stuff in our 20's and the ones we look back at are not the things, but what we did. So don't skimp on the memories, because when you are older (even in your 40's) or when you have a family, you will never have the same freedom as you did in your 20's. Spend, just be smart about it.


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## scorpion_ca (Nov 3, 2014)

Dimpled Balls said:


> Are there any particular books you recommend?


I enjoyed reading the following books.


The Elements of Investing: Easy Lessons for Every InvestorBurton G. Malkiel & Charles D. EllisThe Four Pillars of Investing: Lessons for Building a Winning PortfolioW. M. BernsteinThe Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market ReturnsJohn C. BogleThe Little Book that saves your AssetsDavid M. DarstThe Big Secret for the Small InvestorJoel GreenblattThe Automatic MillionaireDavid BachCommon Stocks and Uncommon Profits  Philip A. Fisher The Simple Path to Wealth: Your road map to financial independence and a rich, free lifeJ L CollinsThink and Grow RichNapoleon HillThe Little Book of Behavioral Investing - How Not to Be Your Own Worst EnemyJames MontierWinning the Loser's Game : Timeless Strategies for Successful InvestingCharles D. Ellis A Wealth of Common Sense : Why Simplicity Trumps Complexity in Any Investment PlanBen CarlsonMastering the Market Cycle Getting the Odds on your SideHoward MarksThe Most Important Thing Uncommon Sense for the Thoughtful InvestorHoward MarksThe Intelligent Investor: The Definitive Book on Value Investing Benjamin GrahamThe Richest Man in Babylon George S. ClasonA Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing Burton G MalkielBeat the Bank: The Canadian Guide to Simply Successful InvestingLarry BatesStocks for the Long Run : The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies  Jeremy SiegelOne Up On Wall Street: How To Use What You Already Know To Make Money In The Market Peter LynchThe Psychology of Money: Timeless lessons on wealth, greed, and happinessMorgan Housel


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## james4beach (Nov 15, 2012)

banjopete said:


> The other life in a small area is touching on the ditch the car idea that was raised earlier. Car's suck, traffic sucks, and the costs for cars add up significantly over a life time. If you can live close enough to where you expect to work the time and cost saving for active commutes (run/bike/skate/scooter/walk) or public transit are significant over a working career.


Really good point. Just for fun, I'll estimate how much extra money I've been able to save up by ditching the car and living close to my workplaces over the years.

I've been [mostly] car-free for about 10 years. I use car rentals, car shares, and Lyft services which cost me about $1,700/year (includes all parking, fuel, insurance).

If I had owned a car instead, it would probably have required two cars over that decade. Let's assume second hand, maybe $6,000 for each car minus some present day value, let's call that $1,000 a year for the equipment.

Annual costs if I had owned a car the whole time:
cost of car, $1,000 as above
insurance, $1,800
city parking, $1,200
maintenance, $500
gas for light use, $500
Total annual cost of ownership = $5,000

So I would estimate my annual cash savings of being car-free as $5,000 - $1,700 = $3,300 per year.

Saving/invest that spare cash over 10 years at a conservative 5% assumption gives me about *$43,000*. I'd say that's a pretty significant savings.


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## banjopete (Feb 4, 2014)

It's massive, and yet so few truly acknowledge it. I'd also suggest you're way under on the average spend too. I love and hate to know about it but if you can go car free wow is there financial incentive, not to mention all the mental and physical health benefits which are hard to value.


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