Budgeting tips for new graduates
University students at graduation

Congratulations! You’ve graduated from university or college and landed your first full-time job. While this is an exciting time for many people, it can also be stressful since it might be the first time where you truly feel like an adult. On a positive note, getting that first large paycheque is a magical feeling. But if you don’t plan, you could end up blowing all of your hard-earned cash. Here are some budgeting tips for new graduates. 

Create a budget

No one will blame you if you decide to treat yourself with your first paycheque, but you’ll want to create a budget soon to keep your finances in check. Budgets are straightforward since you’ll want your expenses to be lower than your income. That said, breaking even isn’t the ideal solution. Take a look at your individual situation and see what you can do to put yourself ahead. For example, if you’re still living at home rent-free, you’ll want to save as much money as possible while you have limited expenses.

Don’t stress too much about savings

The reality is that when you land your first job, you won’t be making a ton of money. In fact, there’s a good chance that the money you’re bringing in won’t cover all of your wants. While that may sound frustrating, it’s okay. During your early working years, you’ll want to ensure that you’re making enough to survive with a little left over for savings. The idea is that once you climb up the corporate ladder, you’ll earn more money, which will allow you to save more. As long as you’re avoiding lifestyle creep, you should slowly see your savings grow.

Reconsider your banking options 

The big six banks in Canada typically offer students a free comprehensive banking package. However, once you graduate, you may automatically be put on a standard banking package. Although this banking package may be similar to what you already have, you’ll most likely be charged a monthly fee for the service. To lower your fees, you could see if there’s a banking option with a lower monthly fee. Alternatively, some banks will waive the monthly fee if you maintain a minimum monthly balance. Another solution is to consider an online bank that has no monthly fees. 

Think about your expenses

As a new graduate with disposable income, it’s perfectly normal to spend whenever you want. That said, you want to be smart about your money. When creating your budget, it’s a good idea to track your expenses for a few months to see where your money is going. You may find that you’re spending a lot on meals and entertainment. Although you may be okay with that, the money you’re spending might be better allocated to other expenses, such as your goals or paying down your student debt. Besides entertainment, you’ll also want to pay close attention to your subscription services and internet plans. Those monthly costs can add up to be quite a bit. If you’re able to reduce them at all, you’d be putting money back into your pocket each month.

Figure out your goals

Figuring out your life goals when you’re in your early 20s may be difficult, but you need to start somewhere. For example, maybe you’d like to take a trip to Europe, get your master’s degree, or buy a home. These goals come at a financial cost, so you need to add them to your budget. How serious about your goals will determine your budget and spending patterns. Someone that is laser-focused on their goals will likely want to save as much money as possible. That could lead to spending less or possibly working more for extra income.

Don’t pinch pennies

Having financial goals in mind can set you on the right path, but at the same time, you don’t want to sacrifice everything just to say you bought a home or paid off your debt as soon as possible. You’re only young once, and having fun is part of life. Plus, taking risks when you’re younger is a lot easier than when you’re older and have bigger financial commitments. No one is suggesting you go all-in on savings or spending; instead, what you’re looking for is that happy medium that allows you to enjoy life in the present while also saving for your future goals.

Avoid debt

One of the best budgeting tips for new graduates is to avoid debt. Don’t worry too much about existing student debt, as the interest rate is likely relatively low. What you want to avoid is high-interest consumer debt such as credit cards and auto loans. For example, most credit cards charge 20%+ interest. It’s hard to reach your saving goals if you’re paying interest each month. The same applies to car payments. Although the interest rate may be slightly more reasonable, it’s still a monthly cost that you want to avoid if you can.

The bottom line

Managing your budget as a new grad is one of the most difficult things to do. You may be getting your first big paycheque, and there might be expenses that you never had to pay before. Balancing your wants with savings is easier than you think. Just start small and make adjustments to your budget as needed.

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. As a completely self-taught, do-it-yourself investor with no formal training, he makes money easy to understand for all Canadians. His specialties include personal finance, budget travel, millennial money, credit cards, and trending destinations.

Barry Choi is a paid spokesperson of Sonnet Insurance.
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