There are few things that can match the thrill and excitement of graduating, and taking your first step towards adulthood. The joy of landing a job as a fresh graduate and earning on your own capability can really make you feel like a grown up.
And with a boom in the start-up and tech industry, fresh graduates in Malaysia indeed have promising prospects on the career front!
But like all good things in life, financial freedom comes with great responsibility. How you handle that first whiff of financial freedom can set the course for your future.
Here are our top tips to help fresh graduates develop a healthy attitude towards their personal finances.
1. Start saving from the get-go
There is no denying that when you get that first paycheque in hand, it can be tempting to let loose and splurge. After all, you have worked hard for it. While it is perfectly fine to reward yourself, you need to keep in mind not to blow through your salary.
Your first salary is a stepping stone of sorts; what you do with it could set a pattern for how you utilise your income. Sure, treat yourself to a fancy meal or a short holiday, but you also need to save. Don’t look at saving as cutting down on how much you can spend, rather think of it as paying for your future self. The more you save today, the more you will benefit tomorrow.
When you consider that almost 65,000 Malaysian youth have declared bankruptcy since 2013 and that the number of youngsters seeking financial counselling is increasing year on year, the need to save becomes imperative. If you think that the traditional ‘budgeting to save’ motto might not be able to help control your expenses, you could look into savings schemes like the Private Retirement Scheme (here’s why millennials should invest in it), fixed deposits (here’s a beginner’s guide) and others.
That said, read investment-related books (here are some great picks) and articles and consult your financial advisor before making any investment decision.
2. Think it through before going for big-ticket purchases
It is natural to want to become independent in every aspect of your life and not just financially. One of the first steps that most of us take when we start earning is to buy expensive things like a car, or setting up a fully-furnished home, especially if you have moved to one of the metropolitan cities like Kuala Lumpur for work.
Some will argue that is a smart way to go bring stability to your working adult life. However, the rising cost of living and low monthly income among the youth (average monthly salary for fresh graduates is between RM2,200 and RM2,500) can put a damper on your plans. Instead of looking at the latest car or pricey smartphone in the market, consider buying second hand (here are the best places for preloved goodies in Klang Valley). You will save yourself from incurring debt at such an early stage. Not only can you save on your expenses, but it will also make it easy on your pocket when you want to upgrade.
3. Start working towards building your credit score
Since it’s your first job, you are starting off with a clean slate financially. This is the time to invest your efforts in establishing good credit health. A simple way of doing this is by applying for a credit card and using it responsibly, apart from being disciplined in your student loan repayments.
With benefits like cashback and reward points, a credit card should ideally help you save more, not spend more. And being consistent with your payments without missing a single deadline will do a world of good to your credit score too.
That being said, it may take a few years of working before you become eligible for your first credit card, and a decent credit score should be enough to ensure you sail through. Before that, you must work towards making sure you’re regular with all your payments (phone and internet bills, student loan repayments, etc.) so that you secure a blemish-free credit report.
Contrary to popular belief, your credit score isn’t just limited to determining your eligibility for loans or credit cards. Some employers and landlords might request access to your credit history too. That is why it is essential that you build a solid foundation for a strong credit profile so that you’re in a better position to get the best financial products in the future.
4. Remember that instant gratification can hit you hard
It is easy to get carried away and indulge in impulsive buys, whether it is to keep up with your friends’ lifestyle or create an impression on your colleagues. Buying expensive clothes and gadgets, dining frequently at high-end restaurants, and other lifestyle choices don’t translate into wise financial deductions when you are just starting out. There is a possibility that you might start incurring debt without having the finances to repay.
It is important that you give yourself time to understand your expenses. Take a few months to figure out what your income means to you, how much you can spend each month, and where you can save. After you have worked out your monthly finances, you will have an idea of how much you can dedicate to other expenses. Read our blog 5 Simple Money Tips to Manage Your Finances Better for some effective hacks.
5. Focus on repaying your student loan
If not repaid quickly, student loans can become a burden. When the time comes to focus on the big financial decisions, like buying a home, education loans could put a dent in how much you can borrow from banks.
Make it a priority to start repaying your student loan as soon as you get a job. If you have opted for student financing through PTPTN, you could benefit from the newly launched scheduled repayable payroll. Depending on your monthly income, a percentage of your salary will be deducted to repay your loan.
Another helpful option could be to convert your PTPTN loan to Ujrah scheme which charges a flat fixed rate of 1% p.a. that is lower in comparison to conventional scheme charges ranging from 3% to 5% p.a. Read our blog 5 Smart Ways to Manage Your Student Debt and Pay it Off Faster for some guidance.
These are our top financial tips for fresh graduates or anyone who is setting off on a journey to become financially independent and stable. It is important to remember that personal finance is one aspect of your life that you will see evolve constantly. It is essential that you utilise this time to develop a healthy attitude towards money, and assess how you handle financial responsibility. A strong financial foundation will go a long way in helping you tackle future challenges.
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