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5 minute read

An Easy Guide to Managing Money and Finances After You’ve Just Graduated

As you turn your back from formal education and enter a brand new school called life, you’ll find yourself trying to make a living for yourself, facing a whole lot of responsibilities and finding a new meaning for the value of money.

As of this moment, you are probably trying to kick off your professional career and attempting to be completely financially independent. Here are some tips to help you take control of your finances in the first few years after graduation.

 1. Clearly define your financial goals

Setting your financial goals is probably not the first thing in your mind after you’ve graduated. Defining your financial goals is not all about when and how you’re going to spend your money. Instead, it’s about setting significant financial milestones to work towards and help you keep focus.

Your financial goals should be divided into three depending on the time-frame.

  • Short-term: This is something that you want to achieve in the near future, maybe in the next 1-3 years. It could be paying off your university debt or saving up for your MBA.
  • Medium-term: Goals in this category can last for 4-7 years, such as growing your portfolio of investments or putting a down payment for a house.
  • Long-term: These can go beyond seven years and may even last a lifetime. It can be anything from saving for your children’s trust fund or paying off your mortgage.

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2. Make a detailed budget

Now that you are making your own money, you might be tempted to make an upgrade from your university lifestyle and start splashing out on fancy things. While occasionally treating yourself can relieve you from fatigue and stress, know what your boundaries are — and budgeting can become very helpful here.

Financial educator and co-author of Smart Money, Smart Kids, Rachel Cruze, tells her readers to “be intentional with your money”. Budgeting lets you know exactly where your hard-earned cash is going. To start, add up the cost of essentials, like your monthly rent, groceries, utilities and transportation. Doing so will let you know how much is left over for other spending and saving.

A detailed and planned budget keeps your expenses and savings on the right track.

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3. Spend within your financial capacity

Big-ticket items like cars and property may be the ultimate exercise of your spending prowess. But if you’re like most young professionals fresh out of university, you may not have the means to buy such things.

Even things like happy hours, gym memberships and out-of-town trips may sound fun and tempting when you start getting paid by your job but these small luxuries can easily eat away your budget.

Remember to spend within your means — what you spend for each month should be less than or at least equal to your monthly income. Don’t feel compelled to spend on anything that you can’t really afford.

Credit cards? As much as possible, avoid using them. You’re spending money you don’t have each time you swipe your credit card. If you can’t pay for a purchase in cash, then you probably cannot afford it. If it’s just an issue of convenience, use a debit or prepaid cards instead.

4. Automate your savings

“Once you have established a budget and have clear short- and long-term goals, one easy way to get in the habit of saving money toward those goals, is to simply automate it,” says Jamie Pomeroy, financial advisor at MerchantsBank. “Set up regular and automatic deposits into your investment and savings accounts, either directly from your paycheque or from your checking account.”

“This is such a simple practice that will pay tremendous dividends in the future. To help you with this, you may also want to check out technology tools that might just make your savings life a little easier,” Pomeroy adds.

Technology has made it easier to automate pretty much everything in our lives. Most banks also have the option for you to register your account online and schedule monthly deposits to your savings account. You can schedule these transfers monthly or bi-weekly to match your salary payout schedule.

Automating your savings is an easy and convenient way to save on a continual basis. It also helps you stay on track with your savings goals, ensuring that you deposit your monthly savings, instead of spending it on something else.

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5. Plan for retirement

You’ve just graduated and are starting out with your professional career. You may think, isn’t it a little premature to plan for retirement? Even though retirement seems like a whole lifetime away, it’s never too early to start saving. This is especially true if you want to retire early.

You can take charge of your financial future by planning your retirement carefully and starting to save as early as now. While it is understandable that you may have more pressing needs at the current time, you can always start small with your retirement fund. As your monthly income increases, so should the money you save for retirement each month.

It’s also best to talk to an adviser to help you lay out a plan for your retirement while guiding you in managing your current financials. A financial adviser will not only help you establish a retirement fund but he or she can also give you advice in securing you and your family’s financial future.

While these money tips are meant to point you in the right direction, it always helps to do your research, read books and talk to experts. Ask questions about how you can better manage your money and more importantly, make sure that you understand the answers. You should secure your financial future as early as now. The sooner you master how to properly manage your finances, the better off it will be.

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