5 Questions New Grads Should Ask Themselves

Across Canada, new graduates attended virtual convocation ceremonies, wearing caps and gowns—either shipped to their homes or retrieved via curbside pickup—and watched the speeches from afar. Of course, that's not the only thing that's different for the Class of 2021.

This year's graduates face unique financial challenges, including a "very confused" job market, says Kelley Keehn, a Toronto-based personal finance educator and the bestselling author of 11 books about money, including Talk Money to Me: How to Save, Spend, and Feel Good About Your Money During COVID & Other Times of Financial Distress.

Already, young people have experienced more pandemic-related job losses than any other age group, according to the Canadian government, and summer jobs remain scarce due to business shutdowns and economic uncertainty. Students may be incurring debt to make up for lost income—and that's on top of their student loans. "It's a very difficult time for new grads, probably the most difficult time ever," says Keehn.

To help navigate the current reality, Keehn shared some financial questions graduates may want to consider.

1. "How can I adapt my plans?"

While world economies recover from the shock of the pandemic, grads may need to rethink their career plans. "Ask yourself what the marketplace is offering right now—what are the opportunities and challenges," says Keehn. "You can still achieve your long-term goals, but you may have to be more resourceful right now while the market might not be optimal for your degree or practicum or mentorship. It will come, but instead of getting defeated, you've got to have a three-point plan for the short, medium and long term."

2. "What can I do to manage my student debt?"

Half of post-secondary graduates have student debt when they finish school, according to Statistics Canada—and that stat is from 2015, well before the pandemic took hold. Keehn encourages grads to look for relief. "I hear so many graduates say, 'Oh, I have so much student loan debt!' and they resign themselves," she says. "Be proactive. Can you get a better interest rate from your bank? Can you get a reprieve from the government? Really digging into your debt is essential."

3. "Where can I cut back on spending?"

Instead of asking people to make a budget—"I don't like using the B word"—Keehn recommends her 30-Day Anti-Budget: tally up your purchases for 30 days, on paper or using an online budgeting tool. "It's an exercise in behavioural awareness. Dig into everything: cell-phone payments, subscriptions. See where your money's going and where you can trim the fat," she suggests. "Many people say they can't afford a TFSA or RRSP, and then they do the 30-Day Anti-Budget and are like, 'Whoa, I didn't know I was paying so much in credit card interest.' One reader realized he was spending $3,200 a year on Diet Coke."

Keehn suggests repeating the exercise once or twice a year. "People have fun doing it. Make it a challenge with a friend," she says. Finding ways to save will also help you achieve another important financial task: creating an emergency fund to eventually cover at least three to six months of expenses. "That may be an overwhelming amount for a new grad, but if you can, start with a few hundred dollars and build it up to a few thousand," says Keehn. "It'll be tough for a little while, as you build that emergency account, but you'll sleep better at night."

4. "How can I make saving a habit?"

Start saving up money, even if it's just a small amount per month, says Keehn. "Every financial expert will say 'make sure you pay off your high-interest debt'—yes, absolutely, but there's something to building even a small amount of wealth, and these positive habits will take you into the future," she adds. "Even if you have debt, put away just $25 a month, to make yourself feel good and build that habit."

Automating your savings can be easy and efficient. Keehn points to NOMI Find & Save¹, a feature in the RBC Mobile app² that uses predictive technology to help you save when you think you can't – it finds money it thinks you can spare and automatically sets it aside for you as savings. By the end of the year, it can be exciting to see how these savings can add up, to help you with your future goals.

5. "How can I help my future self?"

One reason people find it hard to save money is that we tend to see our future selves as strangers—and we're not likely to make sacrifices for people we don't know. "We live with a present bias, and that makes it very easy to want to do everything now and not think about our future self," explains Keehn.

To counteract that bias, she encourages people to envision their future self in detail. "Something I ask everyone to do, whether it's a new graduate or a 40- or 50-year-old, is to think about yourself in five to 10 years. Write down your age—if you're 21, you'll be 26 in five years. Be really specific: What will you be doing? Where will you be living? What do you look like, and how much money will you need? Do that for five minutes a day, a couple of times a week, and you'll get to know your future self."

This exercise can motivate you to balance your purchases today with what you want down the line, notes Keehn. "If you don't build that relationship, your future self is just a stranger you don't connect with."

Bonus tip: Keehn also encourages grads to cultivate their knowledge of personal finance. "I get so upset when I hear people say, 'Money's not my thing,'" she says. "I know it can be overwhelming and confusing, but it's too important to leave your finances to someone else. Be interested, and make it a lifelong passion. It's not that hard—you just have to be interested."