If you’re about to graduate or have recently graduated, first of all – congratulations! Learning never really stops, but with that Diploma/Degree/Masters/PhD in hand, you are now academically qualified with a certification that will help you kick-start your career – be it in a start-up, with the family business, or as part of the corporate rat race.
Before you begin living payslip to payslip, here is some financial advice for all fresh graduates and entry-level executives at their first job, in no particular order.
Build your emergency fund. In your first year of full-time employment, you may be tempted to spend all your hard-earned money, but start the habit of saving early. Pay yourself first by automatically putting aside a portion of your income towards your savings. Save enough to create a three-month financial buffer and grow that into a six-month financial buffer in your second year of employment. The emergency fund prepares you for any financial setbacks or unforeseen circumstances that may require you to spend a little more than usual – such as a dental operation or bust tyres for instance.
One of the best ways to do this is by continuing to live your student lifestyle for as long as you can. If you live at home, continue doing so to avoid having to pay for rent. Keep a lookout for cheap eats and bargains, and live within your means. Don’t get into debt. Hopefully, you will grow addicted to how quickly your emergency savings fund is growing and will continue to save money!
Did you know? When a financial setback occurs, only 18% of Malaysians have enough savings to survive three months while only 6% of Malaysians can survive six months. A setback that might cost only RM1,000 creates difficulties for 75% of Malaysians, and that’s a segment you do not want to be a part of. Start saving and be a part of the 6% that is prepared with a six-month financial buffer.
Understand the concept of lifestyle inflation and resist it. This means you don’t try to compete with your friends or keep up with the Joneses. Don’t try to live where your friends are living, or where they are flying to, or what cars they are driving, or what they are eating and where they are dining. It’s one of the surest ways to deplete your bank account and the this will not make you happy.
Buy a second-hand car. A brand-new car depreciates as soon as you drive it out of the showroom. But it is also a huge expense to take on as soon as you graduate when you could better spend or save your money in other ways. A second-hand car is a more practical choice. You will pay a lower down payment for a cheaper car, with a lower loan amount which means lower monthly repayments to your car loan.
Pay off any debt as quickly as possible. Debt is toxic as you’re just starting out in your career because any money that you intend to save, is worthless as long as you still have debts that charge a higher interest than your saving accounts. The only exception would be debt with less than1% annual interest. Although PTPTN falls within this category, we still recommend paying it off as quickly as possible. You do not want to be blacklisted or barred from leaving the country.
Furthermore, the government now offers a 10% discount for settlement of 50% of your loan and a 15% discount for full settlement of your loan.
Apply for a credit card and start building your credit score. To keep an excellent credit score, you need to ensure you pay off your credit card bill in full, every month. Do not accumulate outstanding debt so be sure to monitor and track your credit card spending and that you are able to pay it off in full. Do not use it as a financial tool to pay for items that you cannot afford to repay in full. Refer to CTOS to keep track of your credit score regularly and track improvements to your score.
Practice lifelong learning. Do you hate your job after the first two weeks? Give it time and don’t give up too quickly. Show perseverance and give it at least six months. The knowledge you will gain from your peers and mentors coupled with on-the-job experience will help you are you develop your skills throughout your career. Practice the art of active listening, because when you listen you have the opportunity to learn new things.
“Spend what is left after saving, instead of saving what is left after spending,” said Warren Buffet. While many preach about setting up a budget, and we have as well in many of our articles, we know that most times we don’t actually do it. So instead, remember that nugget of advice from Warren Buffet. Consider saving as spending money on your future self. Surely, your future self is a worthwhile cause?
Don’t forget to live a little. As a student, you will have plenty of free time but little money. When you begin working, you will have plenty of money (ideally) but very little free time, at least until retirement. Don’t forget to live a little and spend some of your money on a great adventure between the time you graduate and the time you land your first job.