So, you’re a graduate now, are you? That’s exciting. Congratulations!
Now, let’s talk about some of the financial planning issues you might want to consider.
Of course, number one is likely finding a job. (Unless, of course, your first priority is getting a new backpack and heading overseas. If so, please keep your clothes on when climbing any Malaysian mountains.)
Certainly, I may be presumptuous about the job suggestion, as perhaps you have been able to save up while going to university, from your part-time jobs. If so, or if you have a parents’ house to live in, you may have the luxury of an orderly and patient job search.
Hopefully that’s the case…
However, for many new grads, the reality is some short-term debts to be addressed, an urgent need for immediate cash flow, and then the prospect of tackling longer-term student loans.
Good news on the student loans is that most give you six months or some other period of time after graduation before you have to start making payments. But you must definitely keep those payments in mind as you develop your income and expense plan.
Oh, did I mention that another priority should be to develop an income and expense plan, sometimes referred to as a “budget”? Yes, no matter where you will be living, you are going to have some expenses. It’s best to start estimating and tracking them now.
There are several smart phone apps available that make the job easy, and several allow for dictation rather than typing.
What are your long-term goals? Those may especially pertain to career, but could also involve where you want to live, furnishing a place, purchasing real estate, relationships, causes you want to support, and a variety of things.
Hmmm…the best advice I can give in that regard is to purchase a copy of my book, Managing the Bull, which guides you through the process of visioning, goal setting and juggling priorities.
In fact, send me an email and tell me you’re a recent grad, and I’ll give you a copy for free.
The next planning point is to develop a Statement of Assets and Liabilities. If you are like many grads, all the entries might be on the Liabilities side, but that makes it even more important to list them all.
Write down all your obligations - credit cards, overdraft, line of credit, student loans, consumer loans, whatever - including the amount outstanding, interest rate, monthly payments required and any other special terms. Now, rewrite the list with the highest interest rate obligation at the top.
That’s how you tackle your loans, from highest interest rate to lowest, as repayment terms allow and your cash flow improves.
If you find that you can’t handle all those payments and you will be late on any, contact the lender now. Don’t wait until you’re in arrears. If you are already behind on payments, contact the lender as soon as possible and let them know your situation.
Suggest what you think can be a reasonable repayment plan and propose it to them. You have a much better chance of negotiating by being proactive. After you are a couple of months behind - and especially after you’re assigned to a collection agency - your options diminish significantly.
Once you are working, with cash coming in and those obligations being covered, immediately start to save. Sure, you can use a TFSA (Tax-Free Savings Account) or even an RRSP, but my advice is to just start out with a simple savings account. The key is discipline, and putting away an amount like 10% or 20% of every paycheque, and not touching it.
That will give you the liquidity and resources to make important purchases when the time comes. Perhaps most importantly, it will start you on the lifelong habit of saving, which is the single best thing you can do to ensure your future financial independence.
The world is your oyster – don’t shuck it (if you’ll forgive the bad pun)!
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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.
Please consult legal, tax, insurance and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIMis a financial planner and advisor with Christianson Wealth Advisors, a Vice President with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.