As a fresh graduate, keep in mind that you have the most powerful wealth building tool on your side – time. Your first job is a great place to start working on your money management skills, helping you stay ahead of the curve.
Here are a few general tips to keep in mind as you begin your financial journey.
Get into a habit of saving
Living pay cheque to pay cheque is a key inhibitor to building wealth over the long-term. No matter how small your salary may be, make sure to allocate some of this money towards your savings – and don’t fall into the trap of thinking that you will start saving once you earn more. Learning to save early also allows you to take advantage of the magic of compounding interest – which Einstein is said to have called the eighth wonder of the world. Read more about this in our article here.
Allocating a specific percentage of your salary and keeping this money in a separate account is a quick and easy way to get started. Doing this will allow you to build an emergency fund to safeguard against any unexpected events, and also help build reserves for any large expenses in the future, such as the deposit of your first home or purchasing a new car.
Monitor your spending and master budgeting
You can always spend more than you make if you don’t have a plan for your money – and the benefits of learning how to budget will last you a lifetime. While you might be tempted to splurge your salary on entertainment and other luxuries, keep in mind that your post-graduation expenses will also likely increase – owing to accommodation, commuting and other living expenses.
However, this doesn’t mean that you can no longer treat yourself. Monitoring your expenses will help reduce any unnecessary costs (paying too much rent, for example) – allowing you to reallocate these funds towards the things that make you happy. Budgeting will ensure that you are living responsibly, having fun and avoiding debt that you don’t need!
Set goals and work on ways to get there
Visualise where you want to be financially, be it 3 years, 5 years or even 10 years from now. This will give your savings a purpose and keep you working towards specific goals. Once you have an understanding of this, work on a plan to get you there. While setting up a plan is important, what is more important is staying committed to the plan – especially over the long-term!
You should also take this opportunity to venture into the world of investing, given that you have time on your side. By learning to invest early, you can not only take advantage of compounding interest as mentioned earlier, you can also take more risks and learn all about how to invest. Making these mistakes when you’re younger and with fewer responsibilities will teach you how to invest successfully and generate wealth in the long run.
There is no time like the present to get started – leverage the resources you have access to, learn as much as you can, get help when necessary and stay committed to your goals – and enjoy the journey!