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How to build healthy money habits as a recent college or university grad

As the old cliché goes, “do as I say and not as I do.” Never has that been more apt than right now, as you read an article about developing healthy money habits as a recent grad from someone who did anything but that.

When I finished my degree, all I could think about was getting a job as a writer, working and living downtown, and enjoying the weekends partying with friends. Sounds like a pretty typical lifestyle for a recent grad, right? The problem: I put little thought into my expenses or my future. But, now that I’m a few years removed from my own university years, I’ve picked up a little wisdom. I’ve learned through trial and error and I’ll share some tips with you so you don’t make the same mistakes.

 

Consider your finances when choosing where and how to live

Now that you’re saying goodbye to dorm life (RIP beer pong and ramen noodles) you’ll need a place to live. The average one bedroom condo in Toronto now costs $2,230, according to Padmapper’s June 2019 Canadian Rental Report. In Vancouver, it’s a similar story where a one bedroom will cost $2,210.

For a recent graduate, that sort of monthly expense is likely impossible or unrealistic. So, you’ll need to consider other living situations. Some may choose to stay at home with their parents, which will mean paying little or no rent. The sacrifice, though, might be your independence. And, after spending the last two to four years on your own, that may seem like something not worth giving up.

So, what to do if moving back in with your folks doesn’t sound appealing? Consider getting a roommate. As a recent grad, you likely have some friends who are in the same boat. Reach out to them and see if they’re interested in living in the same city as you and, if so, embark on a home search together.

If you don’t know anyone who’s looking to live in the same city, there are plenty of methods to find roommates across Canada; from kijiji to Padmapper and Bunz. Just remember to be careful and do your due diligence if moving in with a stranger.

It might be enticing to live in a pad all your own, but with skyrocketing rent in Canada’s major cities, your bank account will thank you if you split the costs – at least for the first few years of your post-grad life.

 

Prioritize your debt repayment

The average Canadian university graduate finishes school with over $26,000 in debt, according to Statistics Canada. That’s quite the chunk of change to try to put a dent into when just starting your career.

So, take a look at the debt you owe – whether it’s a line of credit, credit card debt, student debt, or a mix of those three – and prioritize paying down the credit lines with the highest interest rates first (usually credit card debt, which is typically 19.99%). To help save money on interest, consider getting a low interest credit card and transferring your balance.

Say you have $3,000 in credit card debt and you put $200 toward paying that down each month. If your credit card interest rate is 19.99%, it would take 18 months to pay off and you’d pay a total of $481 in interest.

Now, say you have an interest rate of 8.99% on a low interest card. That same balance, with the same repayment amount, will be paid off in 16 months and you’d pay a much more meagre $194 in interest.

 

Overhaul your bank accounts

You may have had a student chequing account while in school, but you’ll now need a personal chequing account. If you had a student account, you might be used to paying zero fees. The good news is that there are accounts available for adults that offer no fees. Alterna Bank, for instance, offers its No Fee eChequing Account, which also doesn’t charge for e-transfers.

Simplii Financial’s No Fee Chequing Account is identical to Alterna’s, making it another great option.

Another option is Tangerine’s No Fee Daily Chequing Account. Though it charges $1 per e-transfer.

Any of those options is better than anything your current main financial institution offers (which likely charges up to $15.95 per month for an unlimited chequing account). Choosing a smaller bank can net you an additional $191 in savings each year.

And, while you’re add it, why not add a high interest savings account? Motive Financial offers one of the best current HISAs in Canada, with its Savvy Savings Account that offers an interest rate of 2.8%. Another popular option among Canadians is EQ Bank’s Savings Plus Account, which offers an interest rate of 2.3%.

 

Budget

You’re no longer on a meal plan. Which means you need to make more of an effort when it comes to managing your finances. Budgeting can be boring and complicated; allotting yourself a certain budget for clothing, coffee, and nights out can be confusing and defeating if (when) you go over a specific budget category.

The good news is there are simpler ways to budget. Try this method: Build a budget using four categories: Debt repayment, savings, fixed expenses, and discretionary spending.

Say you take home $3,000 per month. $1,200 goes to fixed expenses (such as rent and utilities), $300 to debt repayment, and $400 to savings. That will leave you with a total of $1,100 to spend on whatever you like: From clothing to entertainment and food. Spend it how you wish, but be mindful: Track every purchase and decide whether or not it was worth it. Consider how your purchases make you feel and adjust your spending each week to ensure you’re only spending money on things and activities that you truly enjoy.

 

Plan for your future

Speaking of saving, now is a good time to think about your future. Retirement may seem like a long way away but, as anyone older than you will tell you, age has a way of creeping up on you.

Investing can be stressful but, lucky for you, with the advent of robo-advisors it’s never been easier to plan for the future. We put together a guide for the best robo-advisors in 2019, so the research is already done for you.

Of course, there are other options for retirement planning, such as self-guided investing or mutual funds. Personally, I use a robo-advisor because I enjoy the simplicity and low fees. However, it’s a good idea to do some research on the various methods of investing and choose the one that’s right for you.

Once you’ve got your debt handled, it’s a good idea to start stashing money away for the long-term, whether that be for retirement, a house, or some other major life milestone.

 

The bottom line

It can be scary striking out in the world alone, and that’s without considering your finances. However, with a little mindfulness, some preparation, and practicing good financial habits, you can become a financial rock star while killing it in whichever industry you choose to work in after you graduate.

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