Nothing feels quite like getting your first pay. It’s a marker of your first taste of financial independence! While you’re looking forward to that first salary, you’re probably also making a list of goodies you’re just dying to buy. It could be that Daniel Wellington watch or a new pair of heels, you name it. Having some spending power feels amazing but that also means having a new responsibility.
Before you let the thrill of your first salary get to your head, it’s probably a good idea to inculcate some good financial habits. Here are a few simple ways to manage your finance right from the get-go as you kickstart your career:
Set a budget and stick to it
Setting a budget isn’t the difficult part. Sticking to it is. A smart way to budget is to categorise items you spend on and set aside a fraction of your income for each of them. For instance, it’s probably quite difficult to cut off spending at the cinemas altogether if you’re a movie junkie. A better approach is to put a cap on how much you spend for each category.
If you’re not sure how to start, perhaps you can take note of some common categories most would spend on: savings, transport, dining, groceries and leisure. Budgeting doesn’t mean you can’t go out and have fun. The whole purpose of budgeting is to make sure you spend responsibly and to spend within your means.
Track your expenditure
The key to tracking your expenses is to key it in once you’ve made a transaction. This habit goes hand-in-hand with sticking to your budget. After all, it’s important to know how much you’ve spent on a category of goods/services so you don’t overspend. Tracking your expenditure will take some self-discipline but with lots of helpful free apps available, tracking your spending is a breeze.
Wally, Pocket Guard, Wallet, Dollarbird, are some of the free apps you can use on iOS and Android smartphones.
Save before you spend
A key reason why many of us overspend is that we don’t put aside our savings first thing after getting our pay for the month. Putting it off eats into your savings and at the end of the month, you’ll often wonder where all that money went.
A great way to save is to save in a separate account. Transfer a percentage of your income at the start of the month to an account meant for savings. Better still, make it an automated transfer so you won’t make excuses or forget!
Start an emergency fund
On top of having some funds saved, you should also consider putting aside an amount for emergencies. This amount should be able to cover your basic living expenses for half a year. Emergencies could come in different forms - hospitalisation, getting laid off from your job, etc. You never know what to expect and it’s always wise to be financially prepared for urgent situations.
Additionally, make sure emergency funds are for EMERGENCIES only. Never dip into these funds for any other reason!
Avoid credit card debts
The moment you start becoming a working adult is the moment you’ll be having conversations about getting credit cards with your peers. Credit cards are all good, as long as you don’t overspend and chalk up debt. Remember, your life will not be over if you can’t get that Prada bag right now. Never charge to your card what you can’t afford.
If you find that you’re already falling into the bad habit of overusing your credit card, you’ll need to find ways to keep that card out of your reach. Leave your card at home and use a debit card instead. Do whatever it takes to keep yourself from accumulating bad debt.
Review credit card transactions
It’s probably not the most exciting thing to do but making sure there are no erroneous transactions is important. No one wants to be charged for something they didn’t pay for. Additionally, reviewing your credit card transactions is also a fantastic way to make sure you’re spending within your means and not accumulating debt.
Starting off with the right financial habits will benefit you in the long run. You’ll learn to have self-discipline, manage resources wisely, and avoid lots of financial problems. While keeping to a budget might sound restrictive at first, you’ll find that staying away from debt and being in control of your finances is true financial freedom. With well-planned finances, you’ll probably be able to accumulate a decent amount of excess funds which you can eventually use to start investing!