Undoubtedly you must be feeling the weight of graduating in the midst of a pandemic. After years of hard work, the class of 2020 is graduating into a new reality characterised by unknowns.
It might be the worst possible time to graduate from college, considering a historic recession. So, how can you adopt good and smart money habits as a fresh grad? Where should you start? We’ve got a few tips to help you out!
Keep a track of your spending
Your life has just taken a massive turn since you’ve just freshly graduated and are out in the real world. During these unprecedented times, look for creative ways to earn some more income outside of your first 9-5 job – maybe consider a side hustle. Additionally, cut down on your spending as much as you can. You’re starting a new chapter in your life in uncertain times. For example, learn how to plan your meals more strategically. Remember that it’s only temporary – you’re just trying to get through the pandemic.
Set a budget
Start young, it’s a good way to show yourself that you’re focused on your best interests. Map out your expenses and have a rough idea of where you want your money to go. A good rule of thumb is to divide your spending. The 50/20/30 budget rule is a great way to get the ball rolling towards financial security. The rule says that 50% of your income goes towards your essentials (needs), 30% toward your wants, and 20% is put away for your savings and investments (the future you). Put together a budget before making major life decisions and don’t forget to count taxes! It’ll have a big significant impact on your budget.
Pay off high-interest debt
If you have a secured job, use any room in your budget to knock out any debt with interest rates greater than 10% – credit card debt. Ignorance may be bliss, but now when it comes to money. Interest payments ‘snowball’ gradually. Have a rough idea of what you’re up against and work towards paying it off ASAP. As a fresh grad, two common types of debt you’ll face are student loans and credit card debt (the real silent killer).
Start saving for emergencies
Life is fragile, anyone can be faced with unexpected emergencies. If you don’t have a ‘cash cushion’ ready for drastic changes like job loss, medical and family emergencies, it can really knock you out. Tip: experts recommend building a buffer of 3-6 months’ worth of household expenses in your emergency fund. Saving every month is a habit. Once you’ve set your budget, put away a small amount to your separate savings account. Why separate? That way you’ll be less tempted to spend it on non-emergency situations.
Get into investing
If you’re ready to dive right into investing, you should! However, if you still feel unfamiliar with the new grad life and struggling to keep your budget under control, you can sit out for this one.
Once you’ve dealt with your high-interest debt and you’ve got the ball rolling with your emergency fund, divert your attention to investing. Investing can help you support your financial goals.
Look out for “Lifestyle Creep”
The phrase ‘Lifestyle Creep’ is very real. It’s when your expenses and salary increase at the same rate. It’s natural to treat yourself once in a while but, cutting down fixed costs as income rises is the fastest way to grow your savings.
Photo Source: Baim Hanif on Unsplash
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