Thousands of young Canadians graduated last month and many are scratching their heads about how to manage their finances going forward. For the past four to six years, a solid majority have been on a tuition treadmill and scraping by to make ends meet. But, a new set of financial skills are required to thrive in adulthood.
Getting a handle on your money after graduation will make you financially resilient, create choices for your future and make you a much happier person. Here are seven smart money moves you can make as a new graduate that will drastically improve your finances.
Don’t stop living frugal
It might surprise you to learn that frugality, which means stretching your dollars as far as they can go, is cited as one of the top skills self-made-millionaires use to build wealth. So, whether you’re lucky and already have a great job, or if you’re still looking for employment, continue to apply the frugal skills you learned while you were a student. Do use coupons and savings apps. Pay using cash or debit. Ask for discounts. Wear those shoes a little longer. And don’t commit to anything big financially, like a new car, a trip, or moving out with a friend, until you’ve mastered the remaining six steps.
Get a job… or two
The job market for new graduates in Canada is precarious and challenging, with many working on short-term contracts, rather than at good quality full-time jobs. But, this won’t last forever. If you focus on the work you do have, always look for ways to grow, add value to the organization you’re with, and rub shoulders with people who can help you, your career with advance. Right out of the gate, however, you might have to take a job, or perhaps even two, that isn’t your dream job. When I graduated I worked at three jobs — product management, freelance writing and slinging drinks on Fridays and Saturdays, which ended up being a fun way to socialize and make money.
Balance your budget every month
Budgeting is a skill you’ll need for your lifetime and effective budgeting means that you spend only what you make — nothing more. Crack open your favourite budgeting template, list all of your expenses and sources of income. If after you tally up both expenses and income, you discover you’re spending more than what you make, you need to cut back. Within your budget, you can plan for fun times, parties, trips and more, but if you’re like most people, you need to budget for these fun events by setting money aside into a savings account in advance every time you get paid. Without a budget, it’s likely you’ll accumulate debt.
Invest $15 per week
$15 is equivalent to one lunch out each week and if totalled over a month, it adds up to $60. If you did this for 40 years (ages 25 to 65), and you earned eight per cent, you’d have $230,000. That’s a lot of money for your future and over time as you earn a higher salary, you’ll contribute even more. You can set up an investment account, a TFSA is probably best, either through your bank, a brokerage or a robo-advisor, and contribute money weekly. This investment money should be worked into your budget.
Pay down your debts
Student loan and line of credit payments typically start within six months of graduation and there’s nothing easy about repaying them. But, the more organized you are about the payments and the more frugal your lifestyle, the smoother the process will go. So, work these payments into your budget and have them automatically deducted on the day you get paid.
If you’re ever feeling down about your finances, know that by making these smart money moves today, even when you don’t have much, you’re investing in a financial education that will last a lifetime. And, within a few years of graduation your financial picture will be brighter.
Sponsored by Shannon Hood Financial Services Inc.