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Good Money Habits for New Grads

5-6 minute read time

You’ve recently graduated and you’re about to embark upon an exciting journey through adulthood – congratulations! You’ve got the whole world ahead of you and many important decisions to make in this exciting new chapter in your life.

Money makes the world go round. Now that you’re newly graduated, it’s time to start paying real attention to your financial decisions! Establishing strong financial habits now will set you up for success down the road and help you to achieve both your long- and short-term financial goals. We’ve outlined the essential steps needed to handle money as a new grad, and to build financial security that will last a lifetime!


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Build a Budget and Manage Expenses

The very first step on the path to financial stability is to create a realistic budget and stick with it. Understanding where your money is going is fundamental to a sound financial footing, and budgeting is a way to clearly see your sources of income contrasted with your expenses.

Creating a budget doesn’t need to be complicated. Download our Free Budget Template now to help get you started.


Deal with Debt

Debt is a common reality for many new graduates. Paying off student loans, credit card debt, an any other form of debt you may carry can seem daunting, but it doesn’t have to be.

Be sure to make the minimum payments for all debts and loans assigned to you and avoid taking on any additional debt. Your budget will help with this – factor your minimum payments into your budget’s regular expenses and use the budgeting system to allocate funds to the right places in order to avoid having to take on any new debts.

Making minimum payments on-time is crucial not only in the sense of working toward becoming debt-free, but it’s also a huge factor when it comes to calculating your credit score. Missed payments negatively impact your credit score, which will give you countless obstacles down the road.

If you’re a new graduate with a tight cash flow, making those minimum payments is the priority at this stage. If you’re able and interested in accelerating your debt repayments, you can consider using the avalanche method or the snowball method to pay off those debts more quickly. However, once those minimum payments are taken care of, it’s essential to build an emergency fund before setting out to accelerate your debt repayment.


Keep Yourself Safe with an Emergency Fund

An emergency fund is exactly how it sounds: a stash of savings reserved in case of emergency. Should you have to make an unexpected and immediate payment towards something important, your emergency fund is there as a cushion to allow you to take care of the issue without needing to open a line of credit and take on more debt. This includes things like your car breaking down, a medical issue, or living expenses should you find yourself suddenly out of work.

It’s typically recommended to keep between 3-6 months’ worth of living expenses in your emergency fund, potentially 9-12 months if you work in a volatile industry (and more if you have dependents). That doesn’t have to all come together at once, though. Start by aiming to build an emergency fund of $1000. Once you’ve achieved that, you can slowly continue saving until you’ve reached the desired amount.

Stash your emergency fund in a high-interest savings account, and don’t dip into it for non-emergency purchases. It’s there in case of emergency, and should an emergency arise, you’ll be glad to have it.


Invest in Yourself

If you’ve accomplished all of the steps previously laid-out, you can begin to explore the world of investing. Hoarding all of your money in a savings account – even one with high interest – hinders your growth, and you lose money to inflation over time. Investing is a tool to counteract that and grow your wealth over time.

Time is the key here. As a new graduate the world is your oyster, and one of the most valuable tools you have at your disposal is time. Time is what allows your investments to grow and compound, resulting in exponential growth as the years go by.

Long-term investing strategy reduces the risks associated with investing, as it allows you to ride out the volatility of the stock market. After all, temporary fluctuations in the market don’t make too much of a difference when it comes to long-term strategy. Starting to invest in your youth, no matter how little, is key to growing wealth through investment.

Educate yourself on the ins-and-outs of investing, discover your own personal risk tolerance, and start small. Only make decisions that you’re comfortable with and feel confident about and be sure that you understand the risks that come with the various assets and markets. If you’re looking for guidance when it comes to investing and strategy, feel free to contact one of the experts at WealthTrack to discuss your situation.


Plan for Retirement

Retirement planning is another situation where time is on your side. Even though you’ve just graduated, you need to begin thinking about how you’re going to set yourself up financially to be comfortable in your later years.

Think about opening a Tax-Free Savings Account (TFSA) and/or a Registered Retirement Savings Plan (RRSP). Each of these account types come with their own set of privileges, and their own set of rules to be followed. For example, there are yearly contribution limits for both a TFSA and an RRSP, and contributing more than the limit comes with penalties. Make sure to educate yourself regarding any and all account requirements before opening a bank account of any type.

When it comes to saving for retirement, the typical advice is to max out your TFSA and RRSP as well as any employer-sponsored account you may have, then look into using a taxable account. It’s important to remember that these accounts don’t need to remain simply savings accounts – in fact, it’s better if they don’t. Investing the funds in these accounts is what will really allow you to capitalize on the power of compound interest and grow your wealth over time so that you’re in a comfortable position when it comes time to retire.

To learn more about TFSAs and RRSPs, visit: How to Effectively Use Your TFSA and RRSP


These are the basic considerations to be made as a new graduate looking to develop good money habits and set yourself up for a lifetime of financial success. Book a call with the experts at WealthTrack if you’d like more guidance surrounding good financial habits, or to discuss your particular situation in more detail.


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