After all the festivities and celebrations, a person who graduated from college has to face the real world. What now? It is time for job-hunting. In this dog-eat-dog world, everyone has to outdo the others in order to survive. However, fresh graduates rarely realize that the only way to have a good future is to be good with managing your personal finance while you are still marketable. Time will come when your future employer will no longer need your services and you will find yourself replaced by a new batch of hungry new graduates. Failure to plan ahead of time will result to a disastrous future.
Here are some pointers:
- Educate yourself. Life is a continuing education. Graduation from college is not the end. It is just the beginning. Try to educate yourself on what was not taught in college. Read books on personal finance. Attend seminars and look for mentors who have been there already. Chances are, their life experiences can help you in your quest for early financial freedom. It is often said that the experiences of others are the best teachers. The earlier you learn, the better it is for you because time is very much on your side.
- Make a budget. Once you are earning income, make sure that you have the habit of making a budget. Budgeting will allow you to allot a certain portion of your income for your expenses and savings. It will also keep you in control of your finances. The budget will be your guide on how much you allow yourself to spend.
- Save up. While still young, you are definitely living with your parents. That means that you have fewer expenses than when you are living on your own. Take advantage of the great savings you have while living with your parents. This is the best time for you to accumulate money while you are just beginning to earn. A good idea is to save up at least 20% of your income. The advantage of doing this is that this will form part of your habit and eventually, your destiny.
- Stay away from debt. Young people tend to pile up debt as they feel they can pay it off easily. They do not realize that the debt trap will suck them into a financial black hole that they can never get out off. A lot of people give in to peer pressure and spend as if they have no tomorrow. Indeed, because of debt, their tomorrow will be gone as they have work for tomorrow’s pay check just to be able to pay off the debt in the past. The best strategy is to stick to one’s budget and stay away from the temptation to spend. If there is debt, make sure to pay it off immediately to save on interest charges.
- Create emergency fund. Allot from three to six month salary to cushion off the impact of emergencies such as sickness, accident or even loss of job. Without an emergency fund, a person will rely on debt just to be able to survive. The debt that saved him temporarily is also the same debt that will kill him financially.
- Saving money is not enough as its value will be eroded by inflation. Inflation is to money as rust is to metals. The only way for a person to have a comfortable future is by investing his money into instruments that have the potential to outpace inflation. In the market, there are avenues such as mutual funds or unit investment trust funds where the average compounded return has proven to beat inflation by as much as twenty percent, Although the past performance was good, it is not a guarantee of future returns.
- Get protected. It makes perfect sense to get insurance while young, especially health and accident insurance, as we do not know what risks lie ahead. Sometimes, these risks put even our financial life in disorder. The best antidote for such risks is to get an insurance coverage. You can get either term life or permanent life insurance depending on your need. Talk to a trusted and un-biased financial advisor for your financial needs analysis.
- Live simply. No matter how much you have earned or saved up, always keep in mind to live simply. Having lots of savings must not become a comfort zone. It is very easy to use up savings on uncontrolled expenses. Always think far into the future and put your imagination at work. Live simply but not to the point of depriving yourself. Everything has to have balance. Enjoy life but keep it simple.
Personal finance need not be hard. Just respect and follow the rules of money and later in life you will reap the rewards. Sacrifice now and enjoy later.