Are you at college or university? Have you recently graduated?
As a recent graduate, it was a juggling act to manage my personal finances as I soon realized it required greater planning and monitoring. I wanted to save but I also wanted to make up for lost time in traveling, seeking adventure and of course, having fun. I must admit, it was a challenge but what better way to start off in the world with my finances under control?
Here are some helpful tips to help you start off on the right foot:
1. Purchase a book on personal finance and money basics:
I enjoyed reading a book by noted personal finance commentator, Beth Kobliner; Get a Financial Life: Personal Finance in your 20s and 30s. This book has quality advice and it helped me uncover many poor habits that I possessed. It is simple to read and great for understanding personal finances. I was impressed with the knowledge and to date, I have managed to save hundreds of dollars each month, established an emergency fund, purchased an additional insurance policy and reduced my dependence on my monthly paycheck.
2. Budgeting is key: It is difficult for anyone to make effective financial decisions without knowing where every dollar is going. In order to budget your money effectively, always balance your expenses with your income. After I resumed worked for a few months, I prepared a budget which involved tracking how each dollar was spent. Secondly, I analyzed where I could cut unnecessary expenses and allocate the money towards paying off my credit card bill and savings goals. Going forward, I continue to keep track of my spending, saving and investing decisions so I can stay on budget. Whether you start working immediately or are seeking employment, budgeting is a lifetime process you should start immediately.
3. Set savings goals: The first savings goal should be an emergency fund. This should be a top priority. As a graduate, you would have diminished most of your savings trying to provide for loans and living expenses. Therefore it is imperative that you begin to replenish your savings. An emergency fund safeguards you from unexpected events in life which require spending significant amounts of money and prevents you from taking on debt. At present, I am currently in the process of building that account. My goal is to have enough to cover at least eight (8) months of expenses. It is challenging, however, I try to make small unburdening sacrifices to achieve this goal.
4. Manage debt wisely:
Graduates should be mindful to avoid all unnecessary new debt. A new credit card, new electronics, trendy clothing can be tempting with the availability of credit offers. You should also pay off the highest interest rate debt first such as credit cards and work towards reducing student loans as quickly as possible. In addition to the monthly installment on my student loan, I occasionally make extra payments in an effort to reduce the principal amount. Every new debt equals a new monthly payment which reduces your saving ability and increases expenses.
5. Assess your insurance needs: Insurance is a priority for new grads. Some policies are not worth the price tag so it is important to determine what best suits you. Health insurance can prove beneficial in the long run, especially for optical needs. I recently purchased an endowment plan at SAGICOR as part of my retirement goals. The terms and payments are attractive whereby you are covered for minimum 40k, it accumulates a cash value and upon maturity your receive 175% lump sum.
6. Pay on time and build good credit: Decisions you make about borrowing, spending and paying bills at a young age can haunt you in the long term. Credit scores are used by banks, insurance firms and employers to determine how responsible you are. Always pay your bills on time and if the need be, set up automatic payments with the banks. Don’t use the credit card if you can’t pay it and monitor your credit position regularly.
7. Find frugal fun: Although you are trying to manage your finances, give yourself room to have a little fun in your budget every month. Even if your funds are limited, enjoy yourself while saving some money. It doesn’t mean withdrawing from your fledging emergency fund, maxing out credit cards or breaking the bank. I recommend taking advantage of “Happy Hour”. I occasionally attend Fort Young, Iron Monkey, and Garage events. They offer discounted drinks and food for a few hours on certain weekdays. If you are not social, engage in free activities around like hiking, beach lymes, learning new skills, or movie nights. I also visit different beaches and rivers.
8. Splurge a bit on life experiences: I love to travel and discover new things. After I graduated, I spent $2500 I’d saved on my first trip to St. Lucia with my colleagues. That experience has left me with memories too rich to put a dollar figure on.
Entering the real world as a new graduate can be intimidating. Goals are important but patience also matters. Don’t be afraid to make mistakes. By positioning yourself to control your finances, you will soon reap the benefits of proper management.
For those still in school, it is important to build the skills to manage your personal finances. It will reduce the impact of the transition. Budget, save a few dollars weekly and remain focused on your finance.
Written by: Luana Laurent, MSc. IF.
Visit her page Finance Focus to get more personal finance tips.