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Pattie Lovett-Reid

Chief Financial Commentator, CTV


Recent grads have the greatest financial luxury of all —  time. Time to build their human capital, the ability to go out and earn a living, while at the same time, build their financial capital for the future. 

For those smart enough to continue their education outside of the classroom, here are a few things to consider from the school of hard knocks.

Lesson one: Save. Plan to save some money. Keep your spending in check. You will create wealth by not spending every dime you have coming in. Try to be disciplined. It is hard not to accept the first job that comes your way, but remember, few ever retire from their first job. So if you take a job that seems routine and uneventful, look for ways to expand your role, build your experience and aggressively network. Feeling unfulfilled in your work environment is no excuse to let spending take over as an escape from the daily grind.

Lesson two: A paycheque is only an illusion of security. Your paycheque will mean nothing to you if you don't use it wisely. Assets will appreciate or depreciate, and how you spend your paycheque will determine whether you are building your financial future or tearing it down. Expensive dinners out, bar hopping with friends, and trips to exotic places are – pure and simple – money spent and opportunity lost. Make sure your assets are appreciating by building up your investment portfolio beginning with a balanced or growth mutual fund, take courses and build your personal portfolio. 

Lesson three: Control debt before it controls you. Time and compounding works wonderfully well for you when you are saving. You have the opportunity to earn income on top of income and create wealth. When you owe money, it works against you. 

The nice thing about new beginnings is that you get a chance for a fresh, financially-savvy start.

Here’s how it works:  

Pay off your highest interest credit card debt first, making sure you avoid the "minimum balance trap." Because credit card companies make their money from interest payments, they purposely set those payments low so it will take you years to pay off the balance. Paying just a little more than the minimum can make a big difference.

Let's assume you have a balance of $5,000 at an interest rate of 15 per cent, and you make the minimum monthly payments of 2.5 per cent of the balance or $25, whichever is greater. It would take you 183 months to pay off the debt and cost you $4,395 in interest. However, if you were to pay an extra $150 each month, you would pay only $845 in interest over 27 months.​