Are you a recent graduate? Congratulations! It’s worth celebrating all the late nights and hard work that went into getting your diploma.
You’re probably busy thinking about what comes next. You might be settling into your first ‘adult job’. Or moving to a new city and adjusting to this new part of your life. All of it is exciting – and maybe a little daunting.
As you collect your first ‘large paycheque,’ it’s a great time to start planning your financial future.
Where do you even start? Start here with our four smart money tips to put you on a solid financial footing:
1. Automate your bill payments – and savings
It can be hard to keep track of multiple monthly charges. Cell phones, streaming services, gym memberships, credit card statements – they add up. And late fees and interest fees can add up, too.
Late payments can have a negative impact on your credit score. To prevent this, sign up for automatic bill payments each month. There are countless apps out there to help you keep track of your accounts. That way, you’ll avoid overdraft charges.
As you automate your payments, why not automate your savings? If money is tight, start with small amounts, even as little as $20 weekly or biweekly. Look at your budget and determine an amount that is realistic for you. Then, set up withdrawals to sync up with your paycheque. Chances are, you won’t miss the money you can’t see.
2. Start saving for the future with an RRSP and a TFSA
With more income, comes more thoughts about saving for the future. That’s where those automated savings will come in handy. It’s time to get familiar with these essential savings vehicles:
- a tax-free savings account (TFSA): As the name suggests, you won’t pay tax on any money that grows in a TFSA. It’s a great way to save for big ticket items like a wedding or a down payment on a home.
- a registered retirement savings plan (RRSP): An RRSP lets you contribute up to a certain percentage of your earned income. It gives you a tax deduction for your contributions. Like a TFSA, there’s no tax payable on the growth in value of investments in your RRSP. But you will pay taxes when you withdraw funds. That’s why your RRSP is best used to fund your retirement. That’s because your income may be at a lower tax bracket by then. You can also use your RRSP to help buy a home, thanks to the Home Buyers’ Plan.
3. Take advantage of your employers’ pension and benefits plan
Retirement might be the furthest thing from your mind as you embark on your new career. It pays to start early though, as time is on your side. Make the magic of compound interest work for you. Start contributing to your retirement savings as early as you can.
So, if your employer offers a company pension plan, think about joining as soon as possible. Some employers offer matching contributions. For example, your employer might pitch in $100 for every $100 you contribute, or a portion thereof. In this case, you’re essentially getting free money you would otherwise not receive.
Read more: Are you passing up free retirement savings?
Make sure you get everything you can from your workplace benefits as well. Health and dental benefits can offset the cost of unforeseen medical expenses. So can disability insurance. Are your workplace benefits offered through Sun Life? You even have access to virtual mental health support through Lumino Health Virtual Care.
4. Make paying off any student loans part of your financial plan
Nothing says ‘grown-up’ like starting to pay back your student loans. If the number seems high, remember the adage. How do you eat an elephant? One bite at a time.
When you know what your payments are, start by building your budget around that repayment. Your regular paycheque will help make that possible. But also, years of living ‘like a student.’ Chances are, you’ve learned to live with less. Inflation and rising cost of living might be a concern for you right now. So build your budget and payback schedule accordingly.
Student debt might mean having to postpone other life plans like buying a home or starting a family. If you can, try to pay it off as quickly as possible. And that includes starting as quickly as possible. In The Money Book for everyone else, financial professional Kelley Keene shares why you should start paying ASAP. “Although student loans give you a six-month grace period to begin paying down the loan, interest on the loans starts to accumulate the day you graduate.” Paying down the debt as soon as possible can help you to avoid substantial interest charges.
Take a deep breath. It’s an exciting time in your life. Remember that paying yourself first is one of the most effective ways of building wealth. You’ll feel good about your decision to make both your today and your tomorrow brighter.
This article is meant to only provide general information. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.
