After College Finances: What Now? %page

After College Finances: What Now?

Posted by Sophie Egge on September 22, 2011 Leave a comment (0) Go to comments

It is a great time. You’ve finished your formal studies and the world is your oyster! The upside is you’re free to do anything you want; Follow your dreams, find the right job etc. The downside is that you’ve probably got a ton of debt, from your student loans, credit card debt and have very little cash. We call it “Young, Fabulous and Broke”.

Almost all of you will have serious questions about your finances. Do you pay off credit card debt first? Pay off student loans first or start a saving fund for retirement? All of these are valid questions so let’s first start by looking at your current situation.

401k/RRSP Matching

Those who are currently working and have a 401k/RRSP plan that matches your contribution should match up to the maximum allowable. Yes, it means that you take home less money but it also means your employer gives you more money for your retirement! Think of it as free money for a little pain.

Pay Credit Card Debt

Those who are working but don’t have a 401k or have one that isn’t matching should tackle their credit card debt. It is the most expensive debt and causes the most financial pain for people. Reduce spending, work with your salary and set aside a good amount every month to settle your credit card debt as soon as possible. Also look at the rates of your credit card. Some cards are more expensive than others. The best cards are almost always those from credit unions.

Emergency Fund

Once all that is settled, you should look at building an emergency fund just in case anything bad happens and you need money immediately. The aim is to get enough money to finance your living costs up to 12 months. Living on your salary check month-to-month is a silly thing to unless you there’s no other choice.

Long-Term Goals

When all of the above financial needs are met, you can start thinking about your medium to long-term financial goals. Think about contributing to a Roth IRA plan and taking care of your future. These are just a few suggestions that new graduates should consider about their finances.