Budgeting 101: Everything Fresh Grads Should Know About Managing Finances

Congratulations on getting past the competitive employment market and kickstarting your career! The road ahead will be both fun and bumpy. But, there are many things you can do to keep the journey as smooth-sailing as possible. Among them is learning how to save money and keep your finances in check. Yes, you have to get started now — your future self will thank you later!

Financial literacy for today’s fresh graduates and young professionals is critical given the economic climate brought about by the COVID-19 pandemic. Gen Zers gearing up to start their careers find themselves in a tight spot, similar to how the oldest millennials faced the Great Recession upon graduation. Just as how the 2008-2009 global financial crisis affected Malaysia, the economic effects of the pandemic are expected to linger for at least a few years more.

All that said, it pays to be smart about money this early in your adult life. It may be overwhelming to think about these things on top of being employed. Discovering ways on how to save money with a fresh graduate’s salary will be challenging. But with some basic financial advice, you will be able to weather the storm with enough savings to keep you afloat.

Basic financial advice for fresh grads: learn how to save money from your salary

Now that you have started to earn your own money, take this as an opportunity to learn about financial wellness. It will be extra challenging to figure out how to save money from salary, especially if your pay is just enough for your daily needs. However, making a habit of saving for and safeguarding your financial wellness will significantly benefit you today and in the future.

The six tips below are easy enough to get you started saving from a fresh graduate’s salary. But, keep in mind that maintaining it will require significant discipline and prudence on your part. There’s no shortcut to being financially healthy!

Tip 1: Keep track of your cash flow and budget. 

The first step to saving is knowing your cash flow. Keep in mind that your take-home pay will most likely be less than your initial salary due to taxes and statutory contributions. This is crucial to setting a budget, which will give you an overview of your spending capacity for a given period.

Next is setting a budget for all your necessary expenses. This step will prevent you from overspending. A few months into your employment, you will begin to see your average spending on food, transportation, Internet, and other essentials. Plan your budget around your necessities, and be mindful of the luxuries you can cut down. Your budget should give you a comfortable allowance for necessary and unnecessary expenses.

Tip 2: Save up for the rainy days. 

Every financial advisor will tell you to save for the rainy days. This will keep you afloat when major life events or emergencies happen, such as sudden unemployment, illness, or moving out. Allot a portion of your salary to save up for a rainy day fund.

As a general rule, you should be able to maintain at least 3 to 6 months worth of expenses. Even if you don’t use this fund, make sure to regularly set aside money for it to help you prepare for other major financial decisions in the future.

Tip 3: Be careful with your lifestyle choices.

Once you start working and earning your own money, you see the world presenting plenty of opportunities to you. Suddenly, you feel a sense of power and freedom to do whatever you want. Lifestyle choices take up a big chunk of this. In turn, whatever decision you make will have an impact on your finances.

Be wary of falling into the trap of carelessly upgrading your lifestyle just because you can afford it now. Even the most negligible expenses, when made frequently, will hurt your finances. So, make sure you aren’t overspending on your wants just because you can do it today.

You may eventually have the money for the latest gadgets, the trendiest clothes, or the vacation that you have always dreamed of. But before you part with your hard-earned money, ask yourself: What will my finances be like afterwards? Am I spending beyond my means? Will I still have enough to go by if I suddenly lose my source of income?

Tip 4: Increase your value.

Career experts are constantly reminding us to never stop learning. The rationale behind this is that, at most, only 50% of what you learn in college will be helpful to in the real world. You will find that many of the skills you need for work will come from real-life experiences and your conscious effort to upgrade them.

Eventually, investing in upskilling or reskilling pays off because it will increase your value. Your additional training may either get you promoted at work or get you considered for a raise. Transferable skills will help you become more efficient at work and provide you with important life skills. Learning new skills will also open you up to other career opportunities that are financially rewarding and personally fulfilling.

Don’t know where to start? Look for digital skills that will add value to your current competencies and ensure a future-proof career. Fortunately, there are now plenty of short courses and online learning resources for virtually every skill you can think of!

Tip 5: Start a side hustle.

For many people across the globe, a side hustle was more of a need than an option during the pandemic. Some jobs started to cut on hours, which resulted in lesser pay. This led many people to turn to multiple freelance and part-time jobs to keep their finances in check.

However, if you are fortunate to be hired into a full-time job, you may still want to consider getting a side job. Delegate some of your free hours per week to a freelance job, if you can. An extra income stream will make saving up easier for you, especially if you plan to make a major financial decision.

Tip 6: Set financial goals.

Now that you have learned how to save money from your salary, you might be wondering: How can I make the most out of these savings? Surely, there’s more to it than having enough for the rainy days, right?

One more thing that you can start practising now is setting financial goals. These are targets or objectives in life that will motivate you to work hard, advance your career, and stay financially healthy. Early in your adult life, you may, for example, work towards being financially independent. You may want to save up for getting your place, moving to another city, or supporting your family little by little. 

Later on, you may start thinking about being an entrepreneur and if you have the interest or skills. You may also want to make investments to grow your money. Both will require careful goal-setting and mindful planning to make sure your finances won’t be negatively affected.

Summary

The mere thought of managing your finances this early may be intimidating at first. However, not having a clear direction on this matter may put you at risk of financial stress, especially in the current economic landscape. Learning how to save money as early as now is a vital life skill that will benefit you in the long run. Make sure you don’t put it off! The best time to start managing your finances is now.

Are you still looking for a job to kickstart your career with? Maybe you are starting to look for freelance opportunities to boost your finances. Regardless of where you are as a professional, make sure to keep your JobStreet profile updated for the #JobsThatMatter. Don’t forget to check out the Career Resources hub for more tips on job searching, self-improvement, and career advancement!