/ Finance 101

Money management guide for graduates

Graduation is a significant milestone; you’ve earned your diploma or degree and have the skills you need to land your first job. While this is a time for celebration, the transition from student life to the “real world” can be a lot to take in, particularly when it comes to your finances.

Do you know the average debt for Canadian graduates is around $26,000?1 This much debt can be difficult to manage when you’re just starting out. Fortunately, there are smart habits you can adopt to tackle debt and become more financially savvy.

Read our money management guide to help you get started.

1. Build a budget

Take a look at your current financial situation and create a budget that works for you. Not sure where to start? First, add up your expenses and deduct that amount from your income. This is the money you can work with to put towards your financial goals. If you haven’t built a budget before, there are plenty of great apps to help you get started, such as Goodbudget and Mint.

Tip: Keep in mind that budgets are constantly evolving. If your expenses or income change at any point, revisit your budget and see what you can adjust.

2. Include updated living expenses in your new budget

Living expenses can be quite different from when you were a student. Although you likely paid for a dorm room or shared a place with roommates, you may have new expenses to budget for such as electricity, water, internet and cable. Depending on your travel arrangements, you may also have to budget for auto insurance and car payments, or plan a monthly transit pass to get around.

Planning for the future might not be the first thing on your mind after you graduate, but the earlier you start saving money for retirement the better."

3. Make a plan to pay off debt

Did you use student loans or a line of credit to finance your education? Now is the time to set a debt repayment plan. If you took out a student loan with the Government of Canada, you have a six month non-repayment period after school ends, which means you don’t have to make any payments for your first six months as a grad.2 Many provincial student loans also offer a grace period where you aren’t charged any interest. Use this time to figure out how much you can afford to pay back on your loan and how often.

Extra tip: Stressed that you can’t make your loan payment? Already missed a loan payment? The Government of Canada has repayment assistance options that may be able to help. Learn about the different options.

4. Save money now!

The moment you have a job, consider splitting your payroll deposit between chequing and savings — even $5 or $10 per pay period adds up. Diversifying your bank account will help you manage expenses and work towards specific goals. Check out our article on 6 reasons to diversify your bank account.

5. Set up an emergency fund

An emergency fund is a smart way to set aside some money for the unexpected. Unplanned events can happen at any time, and it helps to have an extra cushion of money in case times get tough. A general rule is to have enough money in your emergency fund to cover four to seven months of everyday expenses. You many need to build up that amount over time. Just keep in mind any money you set aside will help when you need it.

6. Start an RRSP

Planning for the future might not be the first thing on your mind after you graduate, but the earlier you start saving money for retirement the better. A Registered Retirement Savings Plan (RRSP) is a great savings option; money you deposit in an RRSP is tax deductible and your portfolio grows tax sheltered. Some employers may offer a group RRSP where they’ll match or exceed your contributions. When you start your new job, make sure to ask if your employer offers group benefits and how they work.

Now that you’ve graduated and have your finances figured out, it’s time to work on your financial goals and enjoy the money you make. Managing money and debt doesn’t have to be stressful. The more you plan head, the better prepared you’ll be for any of life’s events.

This article is for informational purposes only. For personalized financial advice, you should contact a qualified financial advisor.

1 “As student debt climbs to an average past $25K...” National Post Canada. 30 May, 2016. Web.
2 “Canada Student Loans.” Government of Canada. 6 February, 2017. Web.

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