Entering the real world is exciting – and scary. Once you’ve landed your first job, you feel like you’ve officially grown into an adult. However, being a grown-up is more than just earning a living; it’s also about learning to effectively manage your finances. We’ve listed down a few tips to get you started on the right track.
Save early. Retirement – why think about that when you’ve only just started working, right? Wrong. Many professionals regret not having the habit of saving earlier in their careers. When you’re young, you have the element of time working with you through compounding interest. Plus, today you can start a savings account with a small initial deposit. The idea is to save for your future self. It’s not just for retirement. You can use the money you’ve saved in case of emergencies, like health problems. Or since you’re still testing the waters in your career, you might suddenly decide to change your career path. You need a fallback plan if there’s going to be a disruption with your income flow.
Live off what you make. Don’t get into the habit of living paycheck to paycheck. That’s when you keep incurring debt and pay them off come the next paycheck. Avoid getting into this cycle. Learn to budget your money efficiently. Spend only what you currently have on hand, minus your savings. Don’t depend on a bonus you might receive for your performance or extra incentives. It’s better to live within your current salary and budget and you can use the addition to your income by placing them in your savings or by paying off your other debts.
Don’t believe the hype. So you’ve got your own job. You’re making your own money. It’s high time you moved out and got a place of your own. Everybody else is getting a condo unit, why not join the bandwagon? While this is a sound idea, buying a condo unit early in your career might not be the wisest choice. Even if you can afford the monthly rent, you still have to cash out a significant amount as deposit. Apart from these, you also need to pay other fees like utility bills and association fees for the building. Paying these off might sink you into debt. Why not try living with roommates, instead. This way, you get to split your rent and utility bills while living independently. Talk with your friends and ask them to be your roommates. It’ll feel like a never ending sleepover – without parents looking over your shoulders.
Ask questions. Just because you’re making a living for yourself doesn’t mean you have to be alone in making important decisions. Don’t be afraid to ask adults or older colleagues for help. As a young professional, you’re in a place where you’re faced early on with decisions that have a lasting impact in your life, especially financial ones. If you’re planning on opening a credit card or getting a loan for an emergency but aren’t exactly sure how to do so, you can ask others who have been in the same position as you. Their insights will be a huge help in your decision-making.
Got any more financial advice for other young professionals? Share them with us by commenting below.