Stepping into the real world
It’s every self-respecting 20-something’s rite of passage into the adult world to be well-acquainted with the F word - dare we say it - FINANCES.
So you’re finally bringing home the bacon. Step 1: treat your folks to a good meal so they know the past 20-something years of raising you haven’t been in vain. Step 2: … now what?
We feel you, financial planning is daunting. Taxes? Expenses? Budgeting? Pffffft. But fret not - here are 10 tips to get you started.
1. Stick to the 50/30/20 rule
Allocate specific portions of your pay to various expenses. The 50/30/20 plan is a good one to follow - 50% to fixed costs such as bills and basic living expenses to, you know, stay alive; 30% to lifestyle spending such as entertainment and eating out; and 20% to your financial goals such as your grand scheme to get married and not die alone.
Of course, that’s just a benchmark and there’s no hard-and-fast rule to dictate exactly how you should manage your expenses. You do you, honey boo, but the bottom line is that you should have a clear idea of how you plan to segment your income. Also, if you save a percentage of your income rather than a set budget, when your pay increases, so do your savings!
2. Settle salary negotiation before sealing the deal
Clinching your first job is a huge success and the thrill that comes with hearing "you're hired!" could cause you to temporarily lose sense of details like remuneration.
The last thing you want is to be suckered into a position where you're severely underpaid. You've worked hard and played your part through all those years of school and training to attain the skill set you have now, so don't sell yourself short!
Most people don’t negotiate their starting salary - they’re grateful enough to even land a job in Singapore’s competitive workplace. But make sure you’re not being shortchanged. Once you begin your job, pay raises come rarely and incrementally, especially in MNCs with rigid pay structures, so negotiating a satisfactory starting salary is key.
3. Keep your budget in check
Keep a log of both your expenditure and your savings so you know you’re on track with your budget. This way, you’ll know right away when you’re overspending, rather than get a mini heart attack only when your credit card bill arrives in the mail at the end of the month. Being able to see your financial goals increasingly take shape is also a form of motivation. Keep going - you’re almost rich!
Make use of free mobile apps on your phone (Android/iOS) to help you manage your money, from logging in your expenditure to even securely syncing to your bank to help keep track of your bills and savings.
4. Get yourself properly insured
Saving for rainy days for – touch wood! – injury and illness is an absolute must. But the little piggy bank of dollar coins you’ve stashed up probably isn’t enough. Similarly, basic insurance policies from employers are often far too little to cover all bases.
You need to get a hold of additional life insurance on top of your company’s policy, and here are just a few reasons why. Furthermore, you’ll be dropped from the coverage as soon as you leave your job so it’s best to keep yourself protected in the face of uncertainty.
5. Set up separate accounts for saving and spending
Open a savings account at a different bank from where you have your current account. People with non-existent self-restraint will empathize - keeping both your accounts with the same bank makes it way too effortless to transfer funds from your savings account to your spending account.
It’s a downright money pitfall - it’s so easy to exceed your spending budget and wind up haemorrhaging what was supposed to be your savings. Oops. Furthermore, having accounts in multiple banks gives you access to deals and privileges exclusive to each bank. Your inner kiasu self must be nodding in approval at this point.
6. Set smart and attainable financial goals
Be as specific as possible with your financial goals. Use numbers and dates - how much do you want to save, and by when? Given so, how much do you need to set aside each month?
A vague game plan makes it easy to justify dipping into your savings. If you’re the type who believes that compromising just a teeny weeny bit on your finances won’t make a difference in the long run, you’ve got another thing coming.
Set smaller, short-term goals along the way to make your target more achievable. The further away a goal seems, the less attainable we perceive it to be, and the more likely we’d give up halfway. Want to save $100,000 for a new car in 5 years? First aim to save $5,000 in 3 months, and then go forward from there.
7. Know what you're spending your money on
Memberships that auto-bill every month are vicious ways that cause you to unknowingly and unnecessarily overspend. Money out of sight is out of mind, but also out of your bank account. I mean, do you really need that Netflix subscription, or that swanky country club membership?
Ok, fine, big yes to Netflix. Everybody needs Netflix. But ditch the club membership that you use only fortnightly.
On that note, consider an all-cash diet.Being physically aware of how much you’re spending also makes you more conscious of where your money is going - it’s a great way to curb your spending appetite.
8. You CAN have too much savings
Stashing all your money in the bank might not be the wisest choice, as your savings will be eroded by inflation. If you’re in a comfortable financial position, think about investing your savings - save to grow your savings, not just for the sake of saving.
We know, it’s a scary notion, but I’m not suggesting to plunge into the stock market head-first. Invest in yourself, for a start - enrol yourself in self-improvement classes to increase your value in the workplace, or invest in a pension.
9. Stay in your job
Captain Obvious at your service!
But hear us out. Perhaps you don’t enjoy your job as much as you thought you would, and are thinking of finding a new job. Don’t! Or at least, wait it out. Serial job-hopping and racking up a history of various short-lived jobs doesn’t speak well of you on your resume, and may damage your future employment prospects.
Even if your job is sucking the very essence of your soul out of you, try to stick it out for at least a year before moving on. It’ll do good for your career and your financial well-being in the long run!
10. Avoid eating expensive food all day, every day
The first few months on the job involve lots of socialising with your new bosses and coworkers. What's more, you're officially on the payroll now so it's safe to indulge in fancy food all the time right? WRONG.
Don’t get pressured into a wining and dining lifestyle that you're yet to be able to afford. Unless absolutely necessary, your office lunch can be settled in the form of a filling and tasty box of $3.50 cai fan. Save the luxurious meals and post-work drinks as special treats. This way you won't have to live on cup noodles when you blow your budget before your next pay is within sight.
I don’t know about you, but all my life, self-sufficiency and the need for financial planning seemed like a thing of the distant future. Who knew that I’d already be needing these tips now? It’s never too early to start. There are always little ways in which we can educate ourselves, whether you’re cultivating discipline to save or exploring means to make these savings grow.
But hey, the sense of satisfaction that comes with payday and the rising figure of your savings account is a sublime thing of brilliance. If you need a trusted way to find out more, you can start by finding out about more savings plans here. PRESS ON!
This article was brought to you by Aviva.