Updated: June 12, 2020
My social media feed was flooded by graduation photos and congratulatory greetings over the weekend, as several colleges and universities held their commencement ceremonies.
If you’re one of those fresh graduates, then let me give you a virtual handshake, a pat on the back, and a warm welcome to the first day of the rest of your life.
Within several months, you’ll hopefully have a job and eventually start making your own money.
That’s why I’m now giving you these eight financial tips, which can help you navigate your 20s easier and with less financial stress.
1. Know your cashflow.
Your take home pay is always less than your negotiated salary and it’s important to know how much money you are exactly receiving every month.
Moreover, make it a habit to track your expenses and know where you’re spending your money.
This is the only way to make sure that you are living below your means — something you should do right off the bat when you start working, just in case you haven’t learned this during college with your allowance.
2. Make saving money a habit.
Your first financial goal is to spend less than what you earn so you can build your emergency fund, which is about six months worth of your expenses.
There’s no shortcut to doing this, so you must be patient.
One of the easiest way to achieve this is to pay yourself first, which means to immediately set aside a portion of your income as savings the moment you receive it. Try it and you’ll see it’s an effective way to save money.
3. Create and follow a budget.
A couple of months after you start working, you’ll already have a good idea how much you’re spending on average for transportation, food, and other expense items.
Use this knowledge to plan a budget.
Be mindful of your needs and wants so you can fine-tune your budget allocation, and have a comfortable allowance for both your necessary and unnecessary expenses.
4. Don’t go overboard with your lifestyle choices.
After graduation, a world of possibilities will suddenly open up to you. It can be overwhelming and challenging, but nevertheless exciting. And along with it comes that greater sense of power over what happens next in your life.
With every choice you plan to make, always consider how it will affect your finances.
You want to travel, try new things, splurge on stuff, and enjoy your youth — go ahead and do those but never at the expense of your future self. There’s always a way to enjoy today AND prepare for tomorrow. Find that balance.
5. Set financial goals that’s worth working for.
You did not graduate college because you passed your subjects. Think of it the other way around — you passed your subjects because you want to graduate college. Getting your diploma is a goal you’ve set and worked hard for, and not simply an accidental result of your actions.
Now that you’re out in the real world, don’t make the mistake of drifting through life hoping that happy accidents will happen.
Instead, create and set life goals, which can inspire you to work hard, motivate you to save regularly, and give you self-fulfillment.
6. Avoid going out of control with your credit card.
Are you looking forward to having your first credit card? I know I was when I started working. That piece of plastic comes with big responsibilities, realize that as early as now.
Use it wisely and you’ll discover the power of leverage, but use it the wrong way and you’ll find yourself in a hole you can’t get out of.
I know there’s so many things you want to buy, but believe me when I say that you’ll eventually be able to buy them in due time and without the need to go into unnecessary debt. Be patient and stay focused on your goals.
7. Be wary of lifestyle creep.
Do you know why so many young urban professionals have no savings?
It’s because they carelessly upgrade their lifestyle the moment they start earning, and especially when they get a raise in their salary; homebody slowly becomes a weekend party animal, someone who used to shop in bazaars slowly becomes addicted to shopping in designer boutiques.
There’s nothing wrong with upgrading your lifestyle, but do it after careful consideration of your cashflow to make sure you’re not going beyond your means. Those seemingly small but unconscious spending can and will hurt your finances.
8. Never stop learning.
You’ve learned so much in college and you’re now ready to apply them in the real world.
Unfortunately, you’ll discover that only 20% of that knowledge will be useful when you start working. I know that’s frustrating but this shouldn’t discourage you. Instead, be excited about the new things you’ll learn.
Beyond learning what you need to be efficient and get promoted at work, you should also invest in yourself and acquire important life skills. This includes proper money management, social communication and networking, productivity and time management, entrepreneurship, and many more.