When you finally graduate university or college, it can be a huge relief – you’re officially with school, homework, and tests! But graduation also brings a whole host of new responsibilities, including career searching and new levels of financial management. Whether you’re just graduating or just know someone who is, here are some pointers for tackling these new money challenges with success.
1. Take control of your debt immediately
National student loans and lines of credit can be staggering to look at once you’ve graduated. Fortunately, there is a grace period after graduation until a you need to start repaying your debt, but that doesn’t mean you should wait – if you have a little extra cash, start paying it off as soon as possible. The National Student Loans Service Centre or your financial institution will set up a repayment plan for you, but interest starts as soon as you are done school. This interest can add extra years to the amount of money it takes to pay off the loan, so you’re better off figuring out your best repayment plan early and sticking with it.
While it’s important to establish credit early on, be careful with credit cards when it comes to paying all your expenses. Consumer debt can get out-of-control easily if you’re not careful. Always pay the minimum balance on time and don’t take out credit if you’re not sure you can pay it down over a reasonable period.
2. Have a budget (but don’t be too strict)
It’s likely not your first time looking after your own money, but student life is different than life as a working professional in a few key ways. Take the time to learn about the basics of personal finances – treat it just like you did your studies (school might be over, but there’s still a lot to learn). This is the best time to set a budget and find out what works best for you as an individual.
Unless you’re one of the lucky few, you probably don’t have a job in your preferred field lined right up. Do some research on the entry-level wages in the career field you want to break into, and use these numbers to create a ‘mock’ budget.
Your budget should include your monthly salary, as well as the following expenses and financial considerations:
- Debt repayment
- ‘Rainy day’ money
When you do eventually that ideal job, re-adjust your ‘mock’ budget to line up with your actual monthly salary. Even though it will feel tempting to splurge on items once you’ve landed the gig, be cautious. It’s important to leave a bit of wiggle room for fun – you want to avoid ‘frugal fatigue,’ which could leave you feeling very discouraged about your financial situation. Think beyond the immediate needs (in other words, put some money aside for sudden and unforeseen expenses), but make sure you’re using a reasonable portion of your funds towards to activities you enjoy.
3. Think long-term so you can get where you want to go
Ok, so you’ve just graduated, and you have a lot more pressing things to worry about than retirement. But think of this – setting a few easy guidelines for saving for later in life can pay huge dividends down the road. If your new workplace offers a pension plan, take advantage of it. Many companies will match your contributions, meaning you’re actually saving double the money you’re putting in. If your workplace doesn’t offer a pension, look at setting up a RRSP with your financial institution.
Beyond saving for retirement, you should put aside some money for an emergency fund. Generally, it’s advisable to put 10 percent of your monthly salary into savings. You can eventually use some of those savings to make a big purchase, like that trip you’ve always wanted to take or a down payment on your very own house.
As a recent grad, you should also think long-term about your career position, itself. It can be tempting to go with the job with the highest pay, but that doesn’t always mean it’s the best choice for you and your life. A lower paying job in an entry position in your desired field can, ultimately, lead you to a happier and more prosperous life in the long-term.
Remember: You are not alone, and help is there
It’s harder than ever to make a go of it as a recent graduate, especially with rising living costs, rent, and possibly interest rates. And that doesn’t include the stress of finding a good job that has a decent wage.
But the important thing to remember is you’re not alone. The same stress you’re feeling is what thousands of other recent graduates are feeling, as well. Determine your career and financial priorities early on and it can save stress in the long run. If you need help figuring out the best way to afford your present save for your future, don’t be shy to reach out to your financial institution and be sure to follow the Moneywise blog for the latest financial tips and news.
It’s also important to remember most people don’t stay in the same career for their entire lives and you can make change, whenever you want. Positioning yourself with the best financial plan, early on, can make it easier to transition to new and exciting opportunities throughout your work career!