– New grads from colleges and universities across the country face some
daunting challenges: Finding a job. A place to live. Paying off those
student loans. It can start to sound a little overwhelming. But there are a
few financial planning tips that can make the transition away from student
life a bit less of a shock.
What should new grads do first?
First, it’s important to take stock financially. You have to make a list of
what you earn and what you spend, what you own and what you owe. Once you
have a good, realistic picture of where you are now, you can start taking
steps to get where you want to go.
For graduates, the single most important short-term financial objective is
to pay down any existing student debt as fast as possible. Debt is
insidious, and compound interest can make the debt load even worse. It’s
critical to develop a debt-repayment plan – and stick to it! Pay down
principal whenever possible. Skipping payments or hoping for some sort of
“debt forgiveness” program is a sucker’s bet. Sitting governments have a
way of promising the moon before elections in an effort to “buy” votes –
especially if they’re desperate – and then promptly reneging on the
promises once re-elected. Dodging a debt repayment, even for a student
loan, will affect your credit rating, possibly impairing your ability to
get a loan for a car or a mortgage for a home several years down the road.
So just don’t go there!
Why start financial planning now?
Although this is just about the last thing graduates have in mind, it’s
important to spare at least a few minutes to think about your future. In
order to create a long-term plan that will provide a real benefit to you,
you need to make some decisions about your future. Make a bucket list of
all the goals you want to achieve in your life and when. Attach a rough
cost to each goal and then work backwards to determine how much you will
need to save to meet each of them.
Save and focus on tax efficiency
Start saving now! Target a certain amount to put aside every month as
savings over and above debt repayments. Some advisers say you should save
10% of your gross income. With most grads in their early 20s, that’s
probably wildly unrealistic. So save whatever you can, even if it’s only a
few bucks a week. You’ll be surprised at how quickly it adds up. Especially
if you invest the money in a tax-efficient way.
Open up a Tax-Free Savings Account (TFSA), and invest the money in some
good-quality mutual funds, many of which typically let you make an initial
investment for as little as $500 or even less. Another option might be a
Registered Retirement Savings Plan (RRSP), which lets you contribute a
certain percentage of your earned income every year, in return for which
you get a tax deduction. Funds grow in the plan on a tax-deferred basis,
and are not subject to tax until you make a withdrawal. RRSPs are generally
for longer-term retirement planning, and are useful once you get into
higher income brackets (and you will).
You can find more information on credit and debt management at the
Financial Consumer Agency of Canada’s
Financial Literacy Database.
Young grads are exactly at the right stage in life to create a financial
plan for a disciplined approach to savings and investing. Stick to it, and
you can achieve great things, and probably a lot sooner than you expect. – Robyn
Robyn Thompson, CFP, CIM, FCSI, is the founder of
Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management
for high net worth individuals and families. Contact her directly by
phone at 416-828-7159, or by email at
for a confidential planning consultation.
Notes and Disclaimer
© 2017 by the Fund Library. All rights reserved. Reproduction in whole or
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The foregoing is for general information purposes only and is the opinion
of the writer. Securities mentioned are illustrative only and carry risk of
loss. No guarantee of investment performance is made or implied. It is not
intended to provide specific personalized advice including, without
limitation, investment, financial, legal, accounting or tax advice. Please
contact the author to discuss your particular circumstances.