Saturday, June 11, 2011

Money management tips & tricks for grads

June is the season of graduation ceremonies so this post is dedicated to all my favourite graduates who are looking lovely in royal blue gowns this week. I’d like to share some tips & tricks for managing money as you make the transition from university to the workplace and into your first home-away-from-home that is bigger than a dorm room.

Live like a student as long as possible.

This is easier said than done as the first batch of paycheques make it tempting to go out and live the highlife with frequent dinners on the town, constant take-out meals, buying a new work wardrobe, jet-setting for vacations, and ordering furniture. However, the longer that you can “live like a student” the sooner it will pay off in the long run.

This doesn’t mean surviving on Kraft dinner and staying at home reading library books, but it does mean:
o       accepting hand-me down furniture to create a shabby-chic apartment
o       making your own lunch for work daily
o       grocery shopping smartly with a list
o       frequenting Wal-Mart for your household basics
o       inviting friends over for a potluck dinner instead of hitting up the local pub
o       indulging in DIY beauty routines

While you may have champagne taste, keep yourself on a beer budget and save! 

Create & stick to a budget

I only started budgeting 11 months ago and I wish I had started the habit as soon as I started working. It gives me a sense of confidence in managing my money and I make smarter choices. I would rather see the balance in my Vacation Fund rise than spend $100 a month at Starbucks. When I started working, I lived paycheque-to-paycheque paying my bills as they came and then I’d go crazy depriving myself to put a huge amount all at once into a savings account. This is no way to control your cash and it is unnecessarily stressful.

Gail Vaz-Oxlade is the guru of money management and I strongly recommend her tools to plan where your hard-earned dollars will go. 

Pay yourself first

I hope that every graduate receives a copy of The Wealthy Barber as a graduation gift, but if you don’t, then please pick-up this must-read. Managing your money can be overwhelming and it is hard to know where to start. I’m still just figuring it out.

But one thing is for sure, the future-me is relieved to know that she’ll retire in style as I’m maxing out my Registered Retirement Savings Plan contributions monthly. The current-me doesn’t even notice as my contribution is taken directly off my gross income and thereby, minimizes my taxable income. If there is one form that you sign with your employer, it should be to sign up for an automatic deduction of 12-18% of your salary into an RRSP. Even if you don’t quite understand what that means, just do it and take some time once you’ve settled into your new life and have read The Wealthy Barber to review your RRSP plan.

Re-read your employer benefits once the ink dries

By the same token, it can feel like a world-wind tour as you sign your first contract with an employer and the 100 forms that come with it. Again, once you feel settled take time to review what you’ve signed and request changes as they make sense. For instance, I was paying $45 a month into a life insurance plan when it finally dawned on me that I have no dependents relying on my salary. The $45 is better spent investing into an RRSP and up’ing my health plan for full dental and eyewear coverage.

Be student-loan free as soon as possible

I paid for my university education with a mix of scholarship and earnings from my summer internships, so I did not have the burden of paying back loans once I graduated. If you do have loans, it should be your priority to pay them off. Based upon your budget and minimum repayment requirement, you should set-up an automatic payment. Time this with the same day as your payday so that your disposable income is reduced right away and you won’t notice a difference in your lifestyle.

Your mode of transportation should be a BMW

Fooled you! BMW stands for bus, metro, or walking. If you’re living in an urban city with ample public transportation now is definitely the time in your life to take advantage of it. As a rule, transportation costs should not exceed 15% of your monthly budget. A 0%-interest loan on a car lease for a MiniCooper may seem like a fabulous way to zip around the city, but consider the hidden costs: insurance, gas, parking fees, and maintenance. Suddenly $73 for a transit pass seems like a bargain.

Take advantage of birthdays & Christmas

Ask for gifts that you really need! Now don’t go all bridezilla as no one likes to be given a checklist to scratch off. When a special occasion approaches and you expect to be spoiled and adored, it is ok to hint for gifts that you'll use and appeciate. Times have changed and young ladies & gents are no longer leaving their parents home right after getting married with piles of wedding gifts so we have to spend our own dollars wisely to create our perfect nest. 

I recommend asking for items that you may have initially purchased on a budget, but would like to upgrade: for instance Egyptian cotton sheets, luxe bath towels, or gardening tools. Likewise, mention your favourite stores so friends & family will know where to shop or where to pick up a gift certificate. I love receiving cards for Winners, HomeSense, Lululemon, Jacob, and The Running Room as these are the stores that I know I’ll hit up at some point for wardrobe additions, condo d├ęcor, and sporty gear.

Be VISA’s worst nightmare

Pay your credit card bill every month on time and in-full. If it’s your first time having plastic to swipe and you don’t think you can show restraint, put your credit card in an icecube tray and freeze it. Only defrost it for planned purchases and then transfer a payment over right away. I use my credit card for most purchases  as I get 1% back on all purchases in December and I pay no account fees. Every 2 weeks, I log-on to my CIBC account and pay each charge on my VISA transaction by transaction. VISA must hate me for it as they earn no interest from me and end up paying me to be there customer!

Don’t cave to the pressure to keep up appearances

Chances are your social group is paying for their ballin’ lifestyle with credit and in the end, it will cost them dearly. The average Canadian consumer debt (excluding mortgages) is $26,000 and this behaviour of over-extending oneself doesn’t happen over night.

Don’t feel the need to rush out and buy a leather couch or designer suit simply because your friends are doing the same. You are not being left behind if you take the time to save up for a dream vacation of tango’ing in Argentina, building a quality designer work wardrobe piece-by-piece, or investing your cash to build a down payment. Figure out a way to get your money to work for you and if you haven’t picked it up yet, Rich Dad, Poor Dad is another great read.

I also recommend setting up an account with ING to automatically move money into a saving account with each paycheque. For your first deposit of at least $100, you’ll get $25. This is an incredible ROI! And if you use my Orange Key Number: 31643528S1 letting ING know that I recommended you, I’ll also get $25. Let’s share the wealth!  ING will also give you $100 for switching your chequing account to them and I’m in the process of doing so too.   
Final thoughts

Graduating from university and stepping out into your first job and first apartment is incredibly exciting and understandably, overwhelming. You might hit a few bumps in the money-management road, but if you resolve to learn & control you finances, you are setting out on one fabulously fun road trip.  



  1. Great tips, Rosie! I thought once I started working that I'd be "rich" because I used to make minimum wage working part-time. But as soon as you're no longer a student, you don't realize that you all of a sudden have all of these expenses that eat up your salary!

  2. Like! I've been a new grad, had the first apartment, and gone back to school and somehow I've always just managed to fail at budgeting. The grocery shopping list is so crucial and it's the one thing I CAN stick to. I also have a set budget of $50 per week in groceries, and if the cashier is ringing in anything over that, I get rid of some items I don't urgently need.

    I'm having trouble saving anything, with the little income I get, so I almost have to live paycheque-to-paycheque. I wish I could cut down! Without treating myself to a night out with friends or a new shirt, I have about $50 left over. :( Any tips or blogs for students on a budget you can share with me?

  3. Thank you very much for this post, it's very informative and BTW I really dig this site so I'll be indicating it to my friends so keep up the good work that have been done on this site.

  4. Regardless of your status, you must learn to set a budget and stick to it. That’s the simplest way not to gain unnecessary bills to pay. Always choose to save rather than spend. Manage your money wisely and don’t let temptation of material things drown you with debt. Show that you are more powerful than money!