Whether you are a post secondary graduate or a high school graduate, it’s never too early to gain financial knowledge to build a bright future. As a graduate, you’ve endured years of hard work, late-night study sessions, and perhaps a few too many instant noodles.
As you step into the “real world,” one of the most crucial skills you can develop is financial literacy. Here are some tips to help you navigate the exciting yet challenging journey toward financial independence.
1. Create a Budget and Stick to It
The cornerstone of financial stability is creating a budget. Start by listing all your income sources, whether from your job, side hustles, or any other avenues. Next, list all your expenses, including rent, utilities, groceries, transportation, student loans, and entertainment.
Once you have a clear picture of your income and expenses, allocate your money accordingly. Aim to save at least 20% of your income and allocate the rest to your costs. Apps like Mint or You Need a Budget (YNAB) can help you track your spending and stay within your budget.
2. Build an Emergency Fund
Life is unpredictable, and unexpected expenses can arise when you least expect them. Building an emergency fund to cover these unforeseen costs is crucial without dipping into your savings or turning to credit cards.
As a rule of thumb, aim to save three to six months’ worth of living expenses in your emergency fund.1 Start small if you need to, but make consistent contributions until you reach this goal. Consider opening a high-yield savings account separate from your checking to reduce the temptation to spend this money.
3. Tackle Student Loans Strategically
If you have student loans, you’re not alone; but if you don ‘t have student loans at this point but plan on it, start by understanding the details and the process. This includes interest rates, repayment plans, and grace periods. Then, create a plan to pay them off efficiently without sacrificing your financial well-being. Every graduate’s repayment plan may look different depending on their financial situation, but staying on top of this debt is important.
4. Start Saving for Retirement
Retirement might seem like a lifetime away, but the earlier you start saving, the more time your money has to grow. If your employer offers a RRSP program or employee stock option plan, take advantage, especially if they match contributions.
Consider opening an Tax Free Savings Account or a First Home Savings Account if a workplace plan is unavailable. This will allow you to save your money and withdraw it tax free.
5. Set Financial Goals
Having clear financial goals gives you direction and motivation. Whether it’s saving for a down payment on a house, traveling the world, starting a business, or retiring early, define your goals and create a plan to achieve them.
Break down your goals into small, manageable steps. Celebrate milestones along the way, and don’t be afraid to adjust your plan as life circumstances change. Regularly reviewing your goals keeps you accountable and focused on your financial journey.
6. Seek Professional Financial Advice When Needed
While educating yourself is crucial, don’t hesitate to seek professional financial advice when needed. A financial advisor can provide personalized guidance based on your unique situation and help you pursue your financial goals. If you want to purchase a home in the future, work with a Mortgage Broker now to find out how to prepare. Speak to Realtors to understand real estate and how the market works. You are never too young to start learning these things and the younger you are and learn them, the more financially stable you will be in the future.
This is often the most neglected topic that new graduates learn or focus on yet it can have the biggest impact on their entire future. The choices made today will shape the financial landscape tomorrow.
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