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9 mistakes to avoid when you transition from university to the professional world

Getting your engineering degree means a big increase in your income but also comes with new financial obligations and life projects. How can you avoid common missteps?


Going from university to the professional world probably represents a turning point in your financial life. At this juncture, you’ll probably start standing on your own two feet as your income jumps dramatically. It’s a time when good and possibly not-so-good habits are formed. Here are nine mistakes you should avoid if you want to set yourself up for financial independence. 

1. Underestimating the importance of a budget

A budget will be an essential tool throughout your life, but especially when you join the job market as your financial situation changes dramatically. 

It may be the first time you’ve seen such large amounts coming into your bank account on a regular basis. According to a recent survey by Genium360, the average annual salary for a newly graduated professional is $68,000 – far beyond the earnings of a typical student. 

That’s exciting, but you don’t want to get carried away because the end of your studies often means leaving home and taking on all sorts of expenses, such as rent, electricity, Internet, insurance, groceries, furniture, appliances, a car and more. If you’re not careful, the bills will climb as high as or – even worse – higher than your new income.

A budget provides a detailed view of all your cash inflows and outflows. It helps you plan your spending and avoid debt. And the exciting part is that you’ll be better equipped to finance projects, such as a vacation or a down payment on a property.

2. Neglecting to build an emergency fund

If you’re lucky enough to come out of school debt-free, an emergency fund should be a priority. It’s a question of protecting yourself from debt with a financial cushion covering three to six months of expenses. 

It may not be as glamorous as a travel fund, but peace of mind is worth its weight in gold. Living from paycheque to paycheque without a cushion means that only one car trouble or appliance breakdown can put you into debt. Unforeseen financial events, whether an unavoidable expense or a loss of income, are inevitable over a lifetime, so it’s best to protect yourself from such occurrences as soon as possible.

3. Mismanaging your debts

Like many people, you may not be fortunate enough to graduate debt-free. It’s essential that you pay down your debts, but you have to do so intelligently because not all debts are created equal. Some debts should be prioritized before the emergency fund, but others are less pressing.

As a rule, you should tackle high-interest debt first. The higher the rate, the bigger the chunk it will take out of your budget. The second factor to consider when you prioritize debt is the size of your monthly payment. The larger the amount, the greater the appeal of paying it off and freeing yourself from such a financial burden.

And what about student loans? The calculations are complicated by the fact that the interest is tax-deductible. A financial planning firm such as FÉRIQUE Investment Services can help you see things more clearly. 

4. Leaving your employer’s money on the table

Your first job in engineering will probably be your first opportunity to join a pension plan. The employer’s contribution is often conditional on your own contribution. For example, if you contribute 5% of your salary, your employer might match that amount.

It may be tempting to put that 5% in your pocket instead – note that it will be taxed! – so that you can take advantage of it immediately. But that means giving up after-tax income that your employer is willing to give you. Along with the emergency fund and high-interest debt payments, your pension plan should be at the top of your list of priorities.

5. Paying yourself last

“I’ll invest whatever’s left at the end of the month.” Do you look at your finances this way? If so, you may have noticed there are often only a few crumbs left in your bank account at month’s end. For good reason, this approach to saving is the perfect recipe for spending everything.

Instead, reverse your reasoning: “Save first, then spend what’s left.” We call it paying yourself first. An effective method is to set up a pre-authorized contribution (PAC) on each payday. As soon as the money is deposited into your account, it gets invested for your future. It’s an excellent way to prioritize important projects and control your spending.

6. Living at or beyond your means

This situation is often caused by underestimating your budget and paying yourself last. You’ll find yourself spending every hard-earned dollar, unable to build an emergency fund and save for your projects. To free up savings and even create a cushion against financial emergencies, it’s vital to have a lifestyle that ensures you live within your means.

7. Putting off saving for retirement

Retirement may seem so far away that it’s tempting to put off saving for it in favour of other projects. But that distant time horizon is your most powerful ally! Thanks to the magic of compounding, the earlier you save, the less space this project will take up in your budget in later years. You could even achieve financial independence well before retirement age! By avoiding mistake number four and taking advantage of your employer’s pension plan, you’ve already taken a step in the right direction.  

8.Using the wrong investment vehicles

How should you save? With an RRSP? A TFSA? An FHSA? Choices abound, but some are wiser than others depending on your situation and plans. All three accounts allow you to increase your investments tax-free, but they have different tax consequences when you contribute and withdraw funds.

For example, an RRSP gives you an attractive tax deduction at the time of contribution, but you’ll have to pay tax on withdrawals. Are such tax rules suited to an emergency fund, for example? When you have a hole in your budget because of an unforeseen event, the last thing you want is to have to pay taxes as well! For such a goal, the TFSA would probably be a better option because withdrawals are tax-free.

9. Not seeking guidance

To make the most of your transition to the professional world, you need a well-thought-out financial approach. This process will need to be updated on a regular basis as your situation and plans evolve. Fortunately, you can access personalized advice and support from a team familiar with the reality of engineering students and professionals.

Podcast - Starting your career on the right financial footing (in French)

Bryan Gagné-Henry, Financial Planner at FÉRIQUE Investment Services, addresses the issue in a podcast organized by the PolyFinances student group

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