The Top 5 Financial Planning Tips Every Fresh Graduate Must Know

This is it: your first job! After years of studying and working hard at university, you have finally landed your first step into your promising career. At this point, the opportunities seem endless. You could rise up the ladder at your current company and be a boss one day, or you could even end up taking bigger opportunities with other employers and building up your work experience.

Life as a fresh grad is exciting because it’s the time to embrace your adulthood and newfound independence. This can feel especially thrilling for those who have moved out for the first time. You are not bound by your parents’ rules — you are now finally responsible for yourself.

While being a newfound adult can be exciting, one crucial aspect you should not overlook is your finances. Financial planning for fresh graduates may not sound as exciting as the other parts of being a new hire, but it could be the one that spells the difference between financial freedom and scraping by as you get older.

Ready to save more money as a fresh graduate and meet financial success? Here are helpful financial tips you should follow.

Financial Tips for Fresh Graduates

1. Understand How You Spend Money

Earning your own money is an exciting milestone. But before you take any next steps towards big decisions, it is important to know and understand how you have spent or saved money in the past so you can navigate this time of major financial change.

Did you use to spend a lot while with your friends? Perhaps you told yourself you would stick to a budget but ended up exceeding that. Perhaps you have also had a tendency in the past to reward yourself after a stressful situation, such as mid-term exams, or an achievement, such as getting a high grade by treating yourself to dinner or shopping for something online. Or, perhaps you are even the thrifty kind, tracking your weekly spending and allocating your money for necessities such as rent or your bills.

There is no wrong or right answer for these, just different habits and attitudes people have towards money. But whichever habit you may have, these can shape your next steps as to how you can plan for your financial goals and even anticipate your spending patterns. Being more aware of your spending and saving habits is key for you to understand your own relationship with money. Then, you will know if there are any habits you need to change in order to meet your financial goals.

2. Be More Strategic About Your Expenses

The feeling can be pretty sweet when you earn your paycheck for the first time. You now finally have your own money to spend on the things you had only dreamt of or even begged your parents for when you were younger. New clothes? Check. A getaway trip with friends? Check.

But wait a minute: while those sound like exciting plans, constantly spending on these wants will not exactly help you in the long run if you want to have a healthy amount of savings.

Think big picture and look at the long term. While a trip with your friends to the beach or abroad is an exciting plan, will it help you reach your plans for the long haul? Not exactly, if this means scraping by just enough for your living expenses at the end of each month.

Think about what you want to achieve, even if it means this dream has yet to happen in years. Do you want to buy your own house? A car? Maybe even get married? These things will cost, and this means having to change your mindset now to achieve these things later.

3. Plan Your Budget, and Stick to It

A budget helps you plan and keep track of what you spend — after all, it would be better for you to know how and when you should spend money versus just freely making any purchases impulsively.

Does this mean you can’t ever make any spontaneous purchases? Of course not. That said, having a budget means knowing the limit of what you can spend based on how much is allotted. This will help you identify whether the item on sale you saw at the mall is worth forking out some cash for. This will help prevent you from spending way more than you planned or to even incurring unnecessary debt that you did not plan on having — further putting a dent in your finances.

There are various ways for you to budget and track your money. That said, all of these tactics try to get to the bottom of helping you understand how much you make and how much you spend. Organising how your money comes and goes will help you have a better look at what your financial situation is like.

One popular way to budget your money is the 50/30/20 rule. This means with what you earn, 50% should go into your needs, such as paying off bills, groceries, rent, and other obligations. Meanwhile, 30% should go to your wants, such as your streaming subscription, budget for dinners or nights out, and even your fancy coffee. Then, 20% should go towards savings and investments — including emergency funds or even investing in stocks or properties.

4. Make a Savings Plan

Saving helps you set aside the important things for yourself: whether it’s for a medical emergency, an upcoming vacation, or even those unexpected times when you would need to shell out cash. Regularly setting aside a portion of your income for your savings will help you feel more stable and secure, knowing that you have a pool of resources you can dip into when you need it.

This doesn’t refer to those impulsive wants. Think about short-term needs, such as suddenly needing emergency funds in case you lose your job, or your family needs something urgently. Meanwhile, more long-term goals for saving include saving up for a home or property or even planning for your retirement (It’s not too early to do so!).

5. Prioritise for the Long Term

Learn the value of delayed spending. Delayed gratification means you are able to put away or delay an immediate impulse in order to receive a bigger, more favourable reward at a later time. It’s like the marshmallow test, but for adults: instead of waiting three minutes to receive more marshmallows instead of one, you could be looking at your own property and investments (and more to spend on luxurious vacations) down the line instead of one quick getaway trip or an impulsive shopping spree at this second. 

Psychological studies have shown that the ability to delay one’s gratification, or a reward they’re anticipating, is a trait present in highly successful people. So instead of always satisfying your impulses, think long-term. 

One more way to speed up your long-term financial goals is to join the FIRE Movement. This stands for Financial Independence, Retire Early. Those in the FIRE Movement aim to stop working full-time early by saving 70% of what they earn and making the most of the remaining 30%. This does require a more intense level of delayed gratification, so better ensure that you are physically and mentally equipped to deal with this arrangement.

You can also invest so your money can grow over time. You may have heard that investing in crypto can be exciting and pay off large, but this can be risky for those who are just starting out. Instead, go slow and steady with an exchange-traded fund, a mutual fund, or even a time deposit.

Getting your first job can be a rewarding milestone. Now on to the next step: charting your path towards financial independence. Learn more from expert insights on achieving career and financial success through the Career Resources page.