The Definitive Personal Finance Guide for Fresh Graduates
Contrary to popular belief, your biggest worry after graduating is not finding a job, it’s managing your finances. Welcome to the world of adulting, where even if you have the power of money hands, you’re soon rendered powerless in the middle of the month when all the money vanishes. Managing money, saving and investing are the three cornerstones of personal finance. It covers the full range of insurance and mortgages, investments, retirement planning, budgeting, banking, tax planning, and estate planning. And the best part is, all these confusing tasks need to be done, all by yourself. So step out of your comfort zone of mummy and daddy’s wallet and upgrade your kid’s account because it is time to make some smart financial decisions!
Alright, you’ve got your first salary, what now?
The first paycheque is that memorable first, that rises above all the other firsts. Although everyone begins their first job at different stages and gets different salaries, the general principle of savings and allocation remains about the same. It is 20% for Savings, 50% for expenses, and 30% for wealth. That is the general rule of thumb. Savings include your savings account and insurance coverage, expenses are your day to day luxuries and necessities, and 30% goes into wealth where you can invest in stocks, ETF, SSB, P2P, REITs, RSP, Robo, and funds, etc. It is nice to treat yourself as a mini business that requires you to be financially adept. You need to spend money on daily operations, that is your expenses, money to capitalize on opportunities, and make sure your business grows, that is your wealth, and money to save for emergencies, your savings account.
On your payday, the salary will be credited to your savings account: One day later, credit 50% to your expenses and then 30% to your wealth account. We recommend you have three different accounts.
So many different banks and accounts, what to choose? The first thing to do after getting your paycheck is going straight to the bank and opening a savings account. Find something that gives you the best interest rate possible. With so many different banks all viciously competing with each other, plans can end up too many confusing terms and conditions.
There are many, DBS Multiplier, OCBC 360 Savings Account, UOB One Account, Maybank SaveUp, BOC SmartSaver, Standard Chartered Bonus Saver, CIMB FastSaver, Citibank Interest Plus.
The meeting criteria set by banks can determine the best savings account. The variables can be broken into:
Basic Information, What is the bank balance, the monthly salary credited and the monthly credit card spend, Bills Spending, The monthly bill amount and the number of bills per month and Unit Trust Investment which is the annual lump sum with the bank and the monthly investment with the bank.
What about the kinds of credit cards? Leveraging on credit cards can help you earn more and generate more savings.
If you’re looking for big-ticket expenses like honeymoon plans and home renovation, AMEX True Cashback, HSBC Advance, and SCB Manhattan World, UOB One will give you the best cashback credit. For groceries, the best cashback comes from BOC Sheng Shiong, Citibank Cashback, CIMB Visa Signature, and Maybank Family & Friends. For Online Shopping, CIMB Visa Signature and Citibank SMRT and for Dining Out & Going Out, BOC Family, CIMB Visa Signature and UOB Yolo and lastly if you’re looking for something low commitment and no minimum spend, you can try Citibank SMRT, POSB Everyday, and SCB Spree.
What about insurance? Unfortunately, there is no stable rubric and one size policy to determine your choice of internship. Primarily, taking the time to understand your needs and the extent to which you would want to spend on coverage is integral to choosing insurance. Insurance ranks by:
- Health, you need this for hospital and surgical bills as well as outpatient care. Your employer might provide this or check out a private hospital or public account.
- Life insurance, Your family gets the sum assured in case your timely demise, your family should get 5x your yearly income, or it is based on liabilities.
- Critical illness, A sum is assured when a dangerous disease is discovered, the payout ties to your life insurance.
- Disability, You will receive a monthly payment if your disability has rendered you unable to work. You usually get at least $3000 a month or based on existing income.
- Personal accident. This covers outpatient accidental medical expenses, and you receive coverage per costs incurred.
While you’re looking for insurance, think about whether you should buy from one agency or pick and choose from various companies.
Agencies focus on different policy types:
If you get an ESSENTIAL, which is a whole life or term life with a particular agency, this might be cheaper than as a top-up rather than purchasing different plans from various agencies. There are excellent advantages by sticking to one agency, having an agent!
Charting a stable career path is also essential. Of course, you would be exposed to the number of kiasu friends who managed to secure a full-time job from before graduating university. However, don’t feel so left behind, before you’re dragged mercilessly into the rat race, it is essential to know what you want, what to expect, and exactly where to grab job opportunities. What is best is always subjective.
Be mindful of your lifestyle choices. Better financial decisions can be made based on lifestyle choices; there is much more to personal finance than investing, getting insured, and securing the best credit card plans. Making small adjustments to daily and monthly savings contribute heavily to savings. Here are some articles that cover that topic:
Investment steps. If you feel ready to embark on your investment journey, remember carefully. Firstly, you need to be debt-free, then you need to have six months of savings funds and enough investible funds, and lastly, this is the most important you need adequate investing knowledge. Do your investing thoroughly and carefully. It should never be a rash decision; you should be well versed with your financial health and conquer the investing mindset of risk preferences better before you invest. You don’t need to be Warren Buffet to get started, but doing nothing letting your money rot in the bank will make you lose out as inflation eats at your savings at almost 2% a year. So consider passive investments, maybe set up a regular investment plan, and set some money for investment!
So there you have it, with some extensive reading, you will be well on your way to being a well-equipped financially aware adult! Having financial get-go and starting your career with the right financial habits will go a long way. And you will be well on your way to enjoy a long comfortable life.
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