The Fresh Grad Starter Pack
You just graduated and got your first payslip. So, what do you do next?
I always like to ask my peers this question, “Do you start saving, or spend as you earn?”. This is because it is important to start cultivating healthy financial habits early as this gives you the flexibility to plan for your other commitments and goals.
Here are some topics regarding personal finances that you should know:
1. Salary & Managing Debts
2. Insurance
3. Investing
Salary & Managing Debts
As a rule of thumb, save at least 3-6 months of your monthly expenses as emergency funds.
Remember not to leave too much idle cash as inflation (generally 2-3%) erodes your purchasing power over time. Next, many fresh graduates will be looking to get a credit card.
Popular types of credit cards include cashback and miles. Do not forget to pay your credit card debt on time as it can affect your credit score which could subsequently affect your credibility and loans. Furthermore, some of you might have to pay for your University loans when you start working. As you settle your school debt, don’t forget that this debt is short term, remember to look beyond settling your school debts and plan for your future.
Insurance
The main purpose of insurance is to protect you, your family and people you care about. Risk is being transferred from you to your insurer, preventing you from suffering from any adverse financial losses. Examples of major risks that one can face include: premature death, disability/dismemberment, critical illnesses, accidents and hospitalisation. It is important to allocate at least 10-15% of your income on insurance from the start as this provides you with a strong foundation in the event that something unfortunate happens. Also, it is cheaper to buy certain insurance (e.g. life insurance) when you are younger.
Investing
A common concern among all undergraduates/graduates is where to begin. Above all, it is vital to understand your risk appetite before you start investing. Are you a cautious, adventurous or a mix between these two? Do you have the time, knowledge, expertise and capital to do active trading by yourself? Rather than diving straight into an investment, start by investing in yourself with some books! A good starting point is passive investment.
So ask yourself now, will you rather be a saver or a spender? Always ensure that you allocate a portion of your salary for proper financial planning.
“A Journey of a Thousand Miles Begins with a Single Step”
– Yeo Tze Hern (@yeomouse), Financial Services Consultant
