British Columbia·Opinion

What financial advice would you give your 18-year-old self? Stay out of debt

I was recently asked this question by a parent of a graduating high school student so I thought I would share my answer.  

Banks, landlords and even employers will judge you based on your credit history

"Sticking to a budget can be a struggle. One trick that I use to keep my spending in check is to equate my purchases with hours worked," says personal finance specialist Mark Ting. (Credit: iStock/Getty Images)

What financial advice would you give your 18-year-old self? 

I was recently asked this question by a parent of a graduating high school student so I thought I would share my answer.

I was first introduced to credit at 18.  I was approved for a $500  credit card which I used, but paid in full every month. Banks, landlords and even employers will judge you based on your credit history — the better it is the more "trustworthy" you are assumed to be.  

People with good credit have a competitive edge. Whenever possible, use credit responsibly but avoid needless debt.

I'm cautious when it comes to students' loans. Given the choice, rather than taking out a loan, I would prefer to see students work for a year, live frugally at home and save for their tuition and living expenses.

The main reason I was able to stay out of debt during my college years was because of the type of summer jobs I worked. For example, I worked with an electrical crew wiring townhouses which paid twice the minimum wage for non-skilled labour. It was hard work, but I could earn the same amount of money in half the time compared to working a retail or fast-food job, so it was worth the effort. 

If working isn't an option and you need to take advantage of a student loan, be sure to end up with marketable skills so that you can quickly pay back your loans.

In my opinion young people should focus on their skills first and their passions second. For those that lack "in demand" skills — skills that others are willing to pay for — they need to go out get them.  

In my case, I wish I'd taken the time at 18 to learn basic electrical, drywall, and carpentry and framing skills. Now that I'm older, I realize just how much money can be saved, or made, by being proficient with tools. For anyone who has tried to hire workers or budgeted for a renovation — you know what I'm talking about.

It's possible to stay out of debt in your college years if you land summer jobs that pay a decent wage. (Graeme Roy/The Canadian Press)

Sticking to a budget can be a struggle. One trick that I use to keep my spending in check is to equate my purchases with hours worked.  For example, if you go to a restaurant and order a $30 steak and a couple of $6 beers, your bill would be $52 after tax and tip.  If you are making $15 dollar an hour, don't think of it as $52, think of it as over four hours of work (which would be $60, but remember, the government takes their cut, so you need to think after-tax dollars).

Is the meal worth working for more than four hours?  For many the answer is 'no,' particularly if they are trying to pay down debt or have other expenses.  As a result, they order a $12 burger and a beer which would cost them less than two hours of work. 

At 18, your priority should be avoiding debt.  Once you land a full-time job you can then start to think about saving.  

I want them to be thinking long term, so I have a couple easy-to-implement suggestions:

  • Read the The Wealthy Barber which teaches the basics on how to save and the benefits of delayed gratification. It's an easy read that had a big impact on my life.
  • Listen to the Side Hustle School podcast — daily 10-minute stories of entrepreneurs starting businesses, often for less than $100. They discuss their successes and failures and get you thinking like an entrepreneur. With our high cost of living, having a side hustle really helps.
  • Get comfortable with tools and take on small renos. Even if you don't have a project in mind, watch DIY YouTube videos so that when the time comes, you are somewhat prepared.  One of my favourites is "Vancouver Carpenter." It uploads weekly short videos on basic drywall and carpentry. 

This column is part of CBC's Opinion section. For more information about this section, please read our FAQ.

About the Author

Mark Ting is a partner with Foundation Wealth, where he helps clients reach their financial goals. He can also be heard every Thursday at 4:50 p.m. on CBC radio as On the Coast’s guide to personal finance. @MarkTingCFP mark.ting@foundationwealth.ca

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