Financial Tips For Fresh Graduates

An investment in education always pays the highest returns

— Benjamin Franklin

Congratulations! You’ve studied hard, completed your exams and passed with flying colours. Now you are armed with your degree or diploma — so what now? Most of you will be looking to enter the workforce, while some of you may go on for further studies at a postgraduate institution, or maybe you’ll take a different path. Regardless of what you do or where you may go, you should learn how to set yourself up for financial success.

You can start by talking about money with someone you trust. Unfortunately, money is often still considered taboo in many circles and we tend to avoid talking about it. But the sooner you get educated on the topic, the sooner you can begin your journey to financial success.

Budgeting

You may have received your first paycheque and are eager to spend it all, if not most of it. However, it is important to remember that repeated actions become habits, and that this could become a quick path to ruin. A budget is a great way to keep track of the money you earn and spend. Making a plan for how you’ll save and spending your money based on your monthly income and expenses can help you live within your means. Creating goals for how much you’ll spend on expenses like rent, food, entertainment, clothing, and transportation and sticking with them is a good way to develop financial discipline.

Saving in a Smarter Way

The interest rates offered on savings account or fixed deposits are currently extremely low. While they may rise in the future, the rates are often far behind inflation. This means that you end up with less purchasing power as time passes. Retirement may seem light years away right now, but it’s never too early to start planning for it. If you are someone who doesn’t like to budget and finds it difficult to keep track of things, there are still practical solutions that you can employ.

Imagine you had a plan — through which consistent saving and smart investing would enable you to generate a sizeable amount over a period of time. Granted, most fresh graduates would not have a sizeable amount that they could tuck away at the beginning. But, if you had $5,000 to start with and are able to commit $600 a month to save and invest, an RSP plan into global equities would enable you to reach $1M dollars in approximately 35 years. That’s a pretty good outcome.

Knowing that you have already set aside $600 a month for your $1M goal could set your mind at ease or even alleviate some of the guilt you may have from spending the rest of your paycheque.

Student loans

Higher education does not come cheap — even more so if you had the opportunity to do it overseas. In a lot of cases, a loan is necessary to help with cashflow and also to lessen the financial burden on your family. Having a plan for how you’ll pay back any loan is important, and student loans are no different. The sooner you pay them off, the less interest you’ll pay over time. Paying more on principal now, means paying less overall. And if you have more than one loan, consider paying down the loans with the highest interest rates first to decrease the overall amount you’ll have to pay. That being said, do check the terms and conditions of the loan to ensure that you are able to pay up early.

Congratulate yourself for how far you have come so far and also gird yourself for the long journey ahead. Establishing healthy financial habits may feel overwhelming at first, but it’s worth it in the long run. You are simply investing in your future success.