I got called by Insight Magazine to advise new grads on what they should be doing about their finances many years ago. It was so long ago, the magazine no longer exists. I gave some answers to the interviewer, but as usual, I was unsure I was very clear or eloquent, so now I will attempt to be more evident to those who might have read the article.
Get The Heck Out of Debt
You have just graduated from University and might carry upwards of $70K in debt (hopefully in student loans only). You most likely won’t be paying that debt off in your first year of working (should you find a job right away). If you can pay it off, good for you! However, it would help if you put together a plan to pay off that debt and WHEN it will be retired.
Carrying debt is a drag on your finances, and the sooner the debt is retired, the easier your financial life will be. It would be best if you did not aspire to “get used to living in debt” this is the one thing my generation does NOT want to hand down to you.
Don’t Fall In Love With Having Money
Just because you have graduated from University and no longer have to eat Kraft Dinner with Hot Dogs for dinner does not mean you must go out every night to eat. You have lived a frugal lifestyle as a student (I am assuming), but if you continued that frugal lifestyle for a while longer, you might be able to pay down your debt faster and then be on a much stronger footing financially.
Yes, you deserve to enjoy life, but it is effortless to get used to the “Let’s go out to dinner tonight we deserve it” lifestyle, and once you are in that lifestyle, the habit is tough to break (speaking as a 61-year-old, I can attest to that issue).
You cannot live your parents’ lifestyle (yet), so don’t try. It took them 30 years to get where they are, don’t rush your spending habits to mimic them.
If your parents paid for you to have a Samsung or an iPhone or paid for your Cell phone bill, maybe it’s time to get rid of this expensive toy? You don’t need $120 a month cell phone bills. Discretionary spending (i.e. money bleeding) is a bad thing that you must watch diligently. Middle age mens’ wastes spread, but their spending spreads like that as well, don’t let it happen to you.
Have a Savings Plan
The sooner you start saving, the better it will be for you when you reach my age. However, saving while still carrying discretionary debt (i.e. non-mortgage debt) is paying Peter to feed Paul. Lowering your debt is first and foremost, if you have leftover moneys from your year. Yes, starting an RRSP early is a good thing to do, but pay your debts first.
Savings is good, and getting out of debt is better.
Get the Heck out of Debt
Banks Can be Negotiated With
As I have pointed out before, Free Banking is possible, but it is more likely for old farts like me, who have a good track record with the bank already. You should try to avoid paying $12-$25 a month in bank service charges since you most likely don’t use enough services with the bank to justify this charge. Go with as cheap banking as you can.
The Three Worst Ideas After Graduation
- I deserve a new car! -or- I deserve a vacation in Las Vegas!
- I’m a little short until my next pay cheque, I’ll get a pay day loan
- I am only carrying a few hundred dollars on my credit card balance this month
Remember, did I mention Get the Heck Out of Debt?
Last Pieces of Advice for New Grads
- Don’t move back in with your parents if you can help it. They love you, but maybe it’s better to stay away.
- Always buy the first round if you are out drinking. Seriously, that is a bit of Life Hacking I was glad I was taught.
- Marry someone who has similar financial aspirations as you. Money destroys more relationships, than religion.
- You will make mistakes financially, the important thing is to learn from them.
- Get out of debt, not sure I mentioned that one.
Etymology: Middle English ypocrite, from Anglo-French, from Late Latin hypocrita, from Greek hypokritēs actor, hypocrite, from hypokrinesthai
Date: 13th century
1 : a person who puts on a false appearance of virtue or religion
2 : a person who acts in contradiction to his or her stated beliefs or feelings
I fail to see “action” that is contradictory to your stated beliefs. Others actions should not be confused with yours.
I thought about it, but I figure I shouldn’t call everyone that.
Yeah, I get it. I come on harsh sometimes. Okay, all the time. It just kills me to see pay day loan links all over your blog when you’re so against them. And rather than responding to someone when they have something to say that’s actually (gasp!) negative, you just throw out a snide comment. Respond? Nah, I’d rather not be held accountable.
The ball is in your court my friend.
I can’t reply, if you ever saw me play tennis, the ball would go into the net. If I can figure out how to get rid of the pay day loan leeches on my web site, I will attempt to remove them.
Negative feedback is ok, I guess, means someone is reading at least.
Good post. Other suggestion: Take a small envelope (this is to make it less daunting) and on the back at the top, write “money coming in” and put down the $$$ you earn every month. Below that, write “money going out” and put down how much the top seven major items like food, rent, going out, car/bus, loan repayment, clothing, everything else. Subtract the second total from the first. Then compare with your bank balance last month to this month.
I sure do love how you’re so anti payday loan, yet I count 3 spots on this page where you’re advertising companies to get one. (one in the google ads in the post, 2 in the text ads on the right side) I know they’re just plugins that you have no control over the content of, but that still makes you a hypocrite.
Saying that, the advice on this post is solid, albeit a little obvious.
I guess I should feel honored you didn’t call me a douche-bag.
Thanks for writing this article. It’s great to offer advice to the youth in hopes that they won’t make the same mistakes that got us into this economic mess.