New Graduates: Tips for thinking about your financial future
Updated: May 15, 2019
Congratulations, you’ve just spent the last one, two, four (maybe more) years learning a lot and now you’ve got yourself a really expensive piece of paper to prove it. But I’m willing to bet the pursuit of your college certificate or university degree didn’t teach you much about managing your personal finances. Am I right?
Right now, your focus is probably on finding work. You’ll probably look for something that’s fulfilling and makes you excited to get out of bed every day. It’s the kind of work we all dream about, and your generation seems to be way more likely to pursue it, whatever the cost. In a recent article in Now Atlantic, Michael Flood, Director of the Nova Scotia Quality of Life Initiative at Engage Nova Scotia talks about how difficult it can be for young people to navigate the economy of 2019. (Note: I'm quoted in the second half of the article too.)
Balancing personal values and personal finances can be tricky, but not if you have a plan! Honestly, at this point in your life, the most important part of your financial journey is actually thinking about your personal finances.
Here are some tips to get you thinking on the right track:
Pay down your debt. Take advantage of the six months of interest free time with your federal student loans, as announced in the 2019 Federal Budget. If you have a steady source of income, try to pay back as much as possible in that period. I can’t stress this enough: that six months is not a “get out of jail free” card. It’s just delaying the inevitable, so you may as well try to put a big dent in your debt before you start incurring interest.
Avoid racking up consumer debt. Resist the urge to spend more than you earn. You may not be making a ton of quid right away, but focus on the essentials and try not to rely your credit card too heavily (and stick to only one credit card). Remember, you’ve got to pay it all back sometime and working against interest is not smart.
Start investing young. Once your debt is out of the way, it’s important to shift your efforts to investing as soon as possible. The earlier you start investing, the better. In the beginning, it doesn’t really matter how much you invest, it’s about establishing the habit. Even if you start by investing as little as $10 per week, or $25 per month, you will start forming the healthy financial habit. Over time, and as your financial situation evolves, you can decide to increase the amount you invest each week or month.
The order of operations is important. Investing while you also have a lot of debt is like trying to fill a bucket that has a hole in the bottom. You’re wasting your time. As long as interest is working against you, any interest you earn in your investments is just a wash. And chances are, the interest working against you will be at a higher rate than any of the interest you will earn in investments. You’re much better off putting any money you intended to invest right onto your debt.
I hope you find these tips helpful as you wave goodbye to academia and enter the working world. It’s an exciting time in your life and with the right plan, you can get yourself on the road to financial security. And again, the sooner the better! Good luck :)
Disclaimer: This blog post is for educational purposes only. Please speak to a licensed insurance and/or investment professional to discuss your options.