The first few years after graduating can be an exciting experience as it opens different opportunities. These include pursuing and earning from your chosen career. You may look forward to having a steady income that can support your lifestyle. However, you also need to consider that this stage in your life can determine your financial future. How you handle your money today can affect what’s in your bank account 10 to 15 years from now.
You can either have a substantial amount set aside or just enough to sustain your monthly expenses. This depends on your spending and saving habits. That’s why it’s important to keep your finances in check. Do this as soon as you graduate from college and land your first job.
If you want to ensure your financial stability, you need to exert some effort in managing your money. To help you get started, here are some money management tips you can try right away.
Stay On Top of Your Debts
It’s quite common for young professionals to have debts. They could have taken out a small loan to help them move to a new city. Meanwhile, they can also begin contributing to their household’s finances ASAP. Whatever the case may be, debts aren’t necessarily a negative thing as long as you stay on top of them. For instance, when taking out cash loans, make sure to explore different options. Select a plan you’re confident you can pay off in time. Consistently paying off your loans can help keep your credit score high. It can open up more opportunities to acquire new and bigger loans in the future.
To manage your debts, save a portion of your monthly income that covers the full amount. Be sure to accomplish this as soon as you receive your salary. Then, settle your debt at once. It’s better to pay your debts early than late to avoid incurring additional interests due to the delayed payment. Also, paying off all debts early is a good habit to cultivate. Later on, it becomes so natural that you don’t notice you’ve completely paid off all your loans.
Monitor Your Expenses
Keeping track of your spending is the first step to being financially responsible. Begin with reviewing where your money goes and the usual amount you spend. In particular, itemize how much and frequently do you spend on transportation, food, and rent. Doing this allows you to get a better idea of your current financial standing. As soon as you understand where most of your income goes, it will be easier to adjust your budget to achieve your financial goals. Getting into the habit of monitoring your expenses also helps you be more mindful of what you spend and lets you find a healthy balance between buying what you want and need.
To track your spending, you can opt for the traditional approach of writing down your daily, weekly, or monthly expenses. Alternatively, you can download an app on your smartphone and use it to input your spending anytime, anywhere.
Be Aware of Your Lifestyle Spendings
As you move up in your professional life, your income will likely get higher. In this case, you’ll more likely to experience a lifestyle creep. This is when your consumption of non-essential goods gradually increases in proportion to your income, which also raises your standard of living. As a result of this lifestyle creep, you may begin to see former luxury items as necessities.
To ensure you don’t overspend, set a cap on your monthly or lifestyle expenses. Before making any big purchases, remember to think it through. It will be helpful to weigh the benefits and disadvantages of buying a particular item, as well as how it will affect your current finances. If you want to avoid spending your excess income, divert it to investments. This will limit the on-hand money you can spend and you’ll find you’re less likely to give in to lifestyle creep, which can quickly eat up your hard-earned cash.
Start Saving as Early as You Can
If your income and lifestyle allow it, begin your savings journey as soon as you receive your first paycheck. As a fresh graduate, you may not have the heavy financial responsibility of providing for your own family yet. This gives you a bit more room to convert a large amount of your income into savings. Get into the habit of saving by reserving at least 10 percent of your salary to build your nest egg. You can either do this manually by transferring a portion of your paycheck to your savings account or automating the deposits through your bank’s app or online facility. The simple practice of saving part of your salary can be extremely beneficial in the future, especially when you need extra money to cover emergencies.
It can be tempting to spend all your hard-earned money, especially your very first paycheck. However, if you aren’t careful with how you manage your money today, you can end up having financial troubles in the future.
Thankfully, these finance and money management tips can help you get started as soon as you graduate and start earning. By making smart and informed decisions today, you can ensure you’re financially responsible and ready for your future endeavors.
Remember, better handling of finances means a better future.
Aside from being a businessman, Josh Austria has been working in PR and media industry for more more than a decade. From his years of experience as the Marketing and Advertising Head of Village Pipol Magazine, he has built strong relationships with creative people, brands, and organizations.