Introductory Guide to Personal Finances

By Natalia Zurowski

Important Disclaimer: The following guide is only to educate models on financial basics and the possibilities open to them when they start earning money from modelling. The Business Model is not here to serve as a Financial Advisor or Consultant and therefore cannot go into great detail discussing financial matters such as dealing with the stock market and investing in mutual funds.

All of the information provided is only to help models understand the importance of saving their money and being responsible. The Business Model cannot be held liable for any decisions models may make regarding their earnings. What a model chooses to do with their finances is his or her own decision and responsibility.

If you are interested in discussing your financial options in detail, The Business Model strongly encourages you to contact a Financial Advisor at your local bank. Speaking to a Financial Advisor is free and they can help tailor a financial plan that's personalized for your own needs to help achieve your goals.

Let's say you go on a contract to Tokyo for two months (60 days), you work well, and end up leaving with $10,000USD (NET) in your pocket. As many young people tend to do, they spend a lot of it right away on clothes, gadgets, vacations, and leave whatever is left to sit in their chequing account. Although many models start young, it's never too early to start saving up for a bright future.

When you're finished a contract and have earned money, you may think to yourself, “I've earned more than I could imagine and I should make the most of it but I don't know where to start. What should I do after a rewarding, profitable, and overall successful trip?”

The first five things you should ask yourself are the following:

1. How much will I need this year?

2. What is the purpose for the rest of my earnings?

3. When will I need it?

4. How much will I need?

5. How is this money going to help me achieve my goals?

Are you thinking of going to school, buying a home, getting married, or even starting a business?

Once you have figured out what you want to put your money towards, make it your goal. Now in order to get there, you need to ask yourself:

1. When do I want to make the purchase/investment?

2. How much do I need to save?

3. How important is this to me?

Once you’ve answered those questions, there are several options to get you there:

 1. A High-Interest Savings Account

- Useful to help achieve short term goals.

 2. An RRSP – Registered Retirement Savings Plan

- Useful to help set up a long term retirement plan

- Also useful for short term savings to return to school or put a down payment on your first condo or house.

3. TFSA – Tax Free Savings Account

 - Useful to help finance long term goals while earning high rates of return aligned with your goals.

4. Mutual Funds

- Mutual Funds are a form of investment where you can put money into a few different companies.

- You can start investing in mutual funds for as little as $50 per month; although this option is not encouraged if your earnings are erratic and not stable, which in modelling, is often the case. Instead, what you want to do is preserve capital; you want to make sure your money stays put and accumulates (e.g. a TFSA) with no risk to lose it.

 - If you're not making millions, it's strongly advised for you to remain practical and protect your capital.

 - For more information on mutual funds please consult a Financial Advisor at your local bank branch.

Scenario

Disclaimer: The following scenario is only to serve as an example of the financial possibilities models have before them and is NOT to be used as a financial plan.

Let's say, for example, that you decide to model part-time for one year. You made a trip to Tokyo and/or maybe one to China or a couple to Europe. In that year, you earned $30,000USD(NET).  Although $30,000USD may seem like a lot of money, it's not a large enough amount to consider investing and is not encouraged. Instead, models should focus on protecting their capital (earnings).

For models who have earned more than $30,000USD in the last year, please consult a certified Financial Advisor for a financial plan designed for your own needs. You shouldn't have such a large amount of money in your chequing account and should seek out ways to get returns on your earnings.

Let's say your annual earnings have been stable and you have continued to make roughly $30,000USD per year over the course of 4 years while modelling part-time. In that time, you could have saved up about $100,000USD. With that money, the opportunity for you to potentially start your own business or purchase a flat opens up. Learning to save your money instead of spending it all can lead to more opportunities and a brighter, more stable future once you finish modelling.

But be careful: If your earnings are very erratic and are less than $30,000 annually, you should consider keeping your money in a savings account and not making any large financial commitments until your income is more stable.

A special thank you goes to Francesco Bongiovanni - Chief Executive Officer at CODIMA and author of, “The Decline and Fall of Europe.”