You’ve finally graduated from college. Congratulations! Now it’s time to face real life, which you’ll soon find out is a lot harder to ace than senior year. The foremost problem you have now will be to find a stable job with a steady income. The trouble is, even if you find a good job, you’ll still have to manage your finances right if you don’t want to end up bankrupt before your thirtieth birthday. Unfortunately, college is not going to teach you how to manage your finances smartly and improve cash flow on the long run. You’ll have to learn it as you go. Don’t let your life be overwhelmed by student debt and bad financial decisions. Here are several extremely useful tips to help you along the way:
Make an Expenditure Chart
Drawing up a chart of all your expenses is simple enough, but it’s an easy task most people fail to do. Start by listing everything you have to spend money on each month, such as mandatory expenses like the phone bill or prescription medication, or “entertainment” expenses like your iTunes downloads and Chinese takeout on Saturday night. Once you do make this list, it’ll be easier for you to understand how much money you should allocate each month on necessary things and how much you might be using or wasting on trivial things. This knowledge will help you better manage your income, so you are not out of cash when the electricity bill shows up.
Resist Impulse Buys
It may be really hard to resist buying that branded shoe or the limited-edition phone case, but you will have to if it’s going to significantly hurt your wallet. Impulse buys, be it food, clothing, electronics, is a glaring indicator of future financial ruin. Don’t take this the wrong way; by all means, allocate some money each month to eat out and have fun, but only after all your compulsory expenses are covered. Your expenditure chart will help you see how your impulse buys can hurt your overall finances.
Pay your Bills before everything else
Don’t wait until the local government issues you a warning about not paying the water bill on time. Learn to pay all your bills on time to save a lot of money later on fines, overdue fees, or worse, legal fees. Make it a habit to pay off your essential bills as soon as you receive your paycheque. (Essential bills mean your rent, utility bills, monthly debt charges, and anything else that you are obligated to pay each month.) Only use whatever’s left after paying the bills for personal use, like grocery shopping.
Save Before Spending
Warren Buffett, someone who knows a lot about finances than you ever will, said that. You need to put aside some money (even a dollar is enough) each month to safeguard your future. Your savings need not be big enough to retire in the Bahamas, but they should be enough to help you out on a rainy day. It helps to have some money set aside when, not if, the unexpected happens. You could end up in an accident that leaves you unable to work for several weeks for example, or in a less serious manner, your laptop might crash and you’ll have to buy a new one. It’s never too late to start saving.
Choose Credit Cards Wisely
Do not get a credit card just because your parents had them, too. You should thoroughly consider if a credit card is suitable for your level of income, because most come with sky-high interest rates. It’s better to start off with a debit card, which doesn’t charge any interest, and instead you get an interest for monthly deposits. Many banks have debit card plans without monthly maintenances fees. Don’t make your loan debt pile up any higher by adding credit card debt to it.
Buy only the Insurance you need
Now that you are in your twenties, you’ll get plenty of offers for mortgage insurance, car insurance, health insurance and so on. Insurance premiums are an expenditure burden that you should take on only if you really need it. You certainly need car insurance if you just bought a car, but you might not need life insurance if you don’t have any dependents. You’ll need to get health insurance before you are in the at risk group for heart disease (means five-star premiums), but you don’t need to apply for homeowner’s insurance for a house you plan to buy ten years from now on. Likewise, decide what’s best for you.
Finally yet importantly, the best financial strategy you can have is to plan for the future in advance. Think about where you want to be financially five years from now on, and organize your expenditures and savings accordingly.
