Remember when you were young and couldn’t wait to become an adult, working and earning your own money? Well, that time has finally come! While the excitement of graduating and landing your first job may be something to celebrate, you also have some serious ‘adulting’ to do when it comes to your finances.
This may be the last thing on your mind, but take a moment to read through these crucial financial planning tips and save yourself from living paycheque to paycheque:
Create a budget
The first thing to do when you start your first job is to create a budget. When creating your budget, you should take into account how much your monthly expenses like rent, utilities, groceries, and any student loan repayments amount to. Once you have a total of the monthly expenses, you can deduct it from your salary and then further divide what is left over for your savings and for you to enjoy. The second part of creating a budget, and probably the most important part, is to ensure that you stick to that budget.
Get a savings plan
Saving should not be an option. It should be a priority. When putting a savings plan together, you need to work with the amount of money you have left over after you’ve made your monthly payments. A percentage of that money should go towards your savings account. A good target to aim for is to save at least 30% of your earnings.
Research the different savings options that banks offer and find the one that best suits your needs.
Having a savings account will help you deal with any emergencies that require money at short notice.
Invest in a retirement plan
An important part of planning for your future is choosing how much of your money you spend now and how much of it you save or invest for your retirement. If the company you work for offers a retirement plan, then jump at this offer. If not, seek one with a financial institution. This will allow you to retire with ease and will enable you to sustain yourself during your retirement years.
Remember, the earlier you start saving towards retirement, the easier it will be to maintain your standard of living when you retire. This could give you the much-needed benefit of choosing where to live and the freedom to enjoy your retirement through travel, or through any other ways in which you plan to spend your retirement years.
Distinguish between needs and wants
Your ability to distinguish between your wants and needs is an important part of developing a healthy relationship with money. Overspending can quickly become a habit and can end up being something you carry with you well into your adult life. The best way to prevent overspending is by ensuring that you stick to your budget and by fighting the urge to spend more than what you should – especially on things that are wants and not necessarily needs.
Here are a few tips to help you prevent overspending:
- Buy quality work clothing instead of expensive designer brands.
- Pack in lunch for work.
- Cook at home instead of living off takeaways.
- Consider lift clubs or public transport to save on petrol costs.
Financial planning requires discipline and commitment. The first steps are to get into the habit of sticking to your budget, having a savings plan, investing for your retirement, and learning to distinguish between wants and needs. By following these steps, you can become money savvy and develop a healthy relationship with money.