How a Financially Illiterate Graduate Saved $9,000 in 2020
I’ve always had a complicated relationship with money. As a young person, I think it isn’t easy to comprehend finances and money fully. Terms like TFSA, RRSP, inflation, index funds, etc., overwhelmed me for most of my young adult life. For me, it is still hard to imagine what my next year will look like, let alone where I will be financially 10 to 20 years down the line.
As a first-generation university student, I was well aware that I would have to get student loans to fund my educational endeavors — without fully understanding what that actually means. I never questioned it because I knew my parents wouldn’t be able to afford my education otherwise, and attending university was my main goal. They often reassured me everything would work out in the end, not to worry about the money, and enjoy my experience.
However, throughout university, money was always something I worried about, but something I didn’t want to come to terms with. I took out student loans to pay for my schooling, which covered tuition, food, rent, and other big variable purchases such as traveling. I was always conscious of my increasing debt and lived within my means, but I never had a concrete plan of how to manage my finances.
As reality sunk in that I would be paying back my loans soon, I began to think about how I would tackle the tens of thousands of dollars in debt. Unfortunately, I had no idea where to start. When I applied to take out my first loans at 17, I wasn’t given a manual on what to do once I needed to pay them back. No one does. I never really thought about my overall budget because I had tricked myself into thinking that I was a financially responsible individual. Boy, I was wrong.
Nearing the end of my studies in mid-2020, I made a pledge to myself that I would become financially smarter and take ownership of my finances. Here are the main things I learned this year that allowed me to save $9,000 in 2020.
Creating an Expense Sheet
This suggestion seems quite obvious, and it is, but it took a long time to admit that I needed a tangible expense sheet. Before, I kept the numbers all in my head, which is not an efficient way to budget. Not only did I need a physical database, but I also needed to hold myself accountable to remain consistent in recording my purchases and income. I could probably write a whole article on creating an expense sheet that works for you. However, here is a quick overview of what I did.
I first created a template in July of this year that I split up into multiple categories. The first category is how much income I make bi-weekly, which would be automatically calculated to give me my total income. The second category is my fixed expenses. These are expenses that stay the same such as rent and car insurance. My variable expenses include food, health, transportation, and entertainment (which should actually be fixed because these have not changed), clothing, personal care, and miscellaneous purchases. These expenses would be added up and subtracted from my total income to indicate what I had leftover for the month.
The pie chart is a visual breakdown of each category. It calculates the percentage of how much I am spending in each category based on my income and expenses. For example, this is where I can see how much I’m spending on food per month vs. my other expenses.
Expense Sheet 1
As you can see, this template is a bit messy and all over the place, but it got the job done and allowed me to identify my spending habits better. The template below is the new and improved expense sheet I started using in November. It follows the same style; however, the main difference is that I can track my savings and expenses.
Expense Sheet 2
This is the template I began using in December, which currently works better for me. The biggest difference is that I can better track my savings progress as well.
I stay on top of populating the expense sheet by designating two strict days to input numbers — the 15th and 30th, which are the days I get paid. However, in actuality, I aim to fill the sheet whenever I have time or have made a larger purchase.
Opening up a HISA and TFSA Accounts
It took me 22 years to open up a savings account. My thinking behind it was that I didn’t need one because I always have money in my chequing account that I never spend as my “emergency fund.” The problem with this is that you’re more likely to spend more money when it is readily available to you in a chequing account, and you’re most likely not gaining any interest on it.
This year I decided to get more serious about my savings by opening up a High-Interest Savings Account (HISA) and a Tax-Free Savings Account (TFSA). A HISA allows you to park your money in an account where it will generate interest. A TFSA allows the same, except it allows you to set that money aside for investments that can grow tax-free. These are very general definitions of what these accounts are but have greatly helped me reach my saving goals.
After doing some research, I ended up opening HISA and TFSA accounts with EQ Bank. They currently have the most competitive interest rates in Canada for both the HISA and TFSA. The HISA currently generates 1.50% in interest while the TFSA generates 2.30%. They also don’t have any monthly fees along with free e-transfers, which was attractive for my financial needs.
I currently use both of these accounts as emergency funds and savings. I keep a certain amount in my HISA for any money I may need to access quickly, while the remaining amount stays in my TFSA.
Writing Down Budgeting and Saving Goals
This was a simple but effective practice I implemented for myself this year. I keep an overall master document that has an overview of my budgeting and saving for 2020.
I created a task list where I have big overarching objectives I want to achieve that are split up into two main categories: Monthly Budget Goals and Monthly Saving Goals. I also have two sections titled at the end called Big Purchases This Year and Financial Reflections from 2020. These include a list of my most expensive purchases split into smaller categories and short bullet-point reflections on my financial accomplishments, things I would like to improve, and my goals for 2021 are.
Here’s the template I use to record all this information:
Keeping a Spreadsheet of my Student Loan Payments
The biggest and only debt I currently have is my student loan debt. I am based in British Columbia, where I have integrated loans. 25% are provincial, and the other 75% are considered federal. At the moment, I keep a simple spreadsheet of the following information
- how much I borrowed each year from each government
- the total amount I need to pay
- the total amount I have paid currently
- the interest accumulating from each (which is currently 0)
This helps me better visualize my debt to make sure I stay on track with payments. It is daunting to see that glaring number. However, I think it’s important to come to terms with your financial situation to take it seriously.
Although I’m embarrassed to admit that it took me this long to gain control over my finances, I know I am not alone in the attempt, and I hope my story inspires others to take their finances more seriously. Money is a significant trigger of stress and anxiety that affects other aspects of your life and negatively affects me throughout my young adult life.
It’s very easy to feel overwhelmed by the realities of your financial situation. However, the facts don’t lie. According to the Financial Consumer Agency of Canada, more than 6 in 10 budgeters (65%) have emergency savings compared with only 4 in 10 persons (39%) who feel too time-crunched or overwhelmed to budget.
Graduating from university during a downturn for employment and opportunities was not ideal, and honestly, it added a significant amount of stress to my everyday life. By implementing the above strategies, it allowed me not only to begin my savings journey but also taught me the importance of budgeting. With this knowledge in mind, it has helped give me clarity on the kind of life I want to build and allows me to envision how to get there.
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