A fresh graduate’s guide to financial planning

So, you’ve earned the degree for which you put in years of effort? Congratulations! Now, soon, you will join your dream job and earn your own money. It’s exciting, isn’t it?

You tend to experience mixed feelings when you graduate. While there is the sadness of parting with your university and friends, there’s also the excitement about your future. If you ask fresh graduates about their future plans, then most of them have a long list of wishes that they would like to accomplish as soon as they get their first paycheck. While some want to travel the world, others wish to indulge in shopping their favourite brands. In the midst of all these desires, savings takes a backseat.

While making your own money is exciting, are you fully equipped to handle your finances? If you ask financially successful people, then they’d advise youngsters to be save and invest their money. This is because neglecting financial planning can lead to serious repercussions. Not only can you be handicapped in emergency situations, but you also fail to achieve financial independence – a situation where you no longer have to depend on a person or a job for your financial needs.

So, if you’ve just graduated and have already started thinking of using your first paycheck, then stop and read this guide on financial planning for fresh graduates to help you handle each penny wisely –

 

Think Before You Upgrade Your Lifestyle

As mentioned earlier, you may have many wishes that you held back until you start earning your own money. It could be leisure travelling or visiting a posh restaurant. When you get employed, it is a natural instinct to upscale your lifestyle in different ways like:

  • Dinners with your friends or colleagues at classy restaurants
  • Frequent visits to pubs or clubs
  • Shopping branded clothes and accessories to fit in with your office culture
  • Taking private transport more frequently since you are capable of spending
  • Other unnecessary expenses like ordering meals and regular takeaway breakfasts

While indulging in such luxuries, you forget the impact it can have on your financial status. The costs may not seem high when calculated per day, but they can add up to a sizeable amount in a month or a year. There’s nothing wrong with upgrading your lifestyle, but, it is important to make sure that you save as much as you spend. Control your spending on these activities and target some money toward saving. Trust us, it is more beneficial than you think.

Beware of the Convenient Credit Cards

A few months after your employment, banks and credit card firms will start luring you to apply for a credit card. There’s nothing wrong in getting one. But, most credit card holders forget its true purpose and end up in debt. It might seem convenient to have a card to get rid of the tension of carrying enough money. While this is true, it can become a habit and credit cards may make you spend on things you do not want to. For instance, you go with your friend to accompany her for shopping, but don’t have enough cash on you. You think this will prevent you from indulging in unnecessary expenses. However, don’t be surprised if you use your credit card to make purchases.  If used wisely a credit card has its benefits. But, if you start relying on it too much, you may end up in debt. And, debt is the biggest obstacle to financial freedom. If you don’t have a credit card, it is best you don’t get one, at least until you start managing your finances well. And, if you have one, then try carrying it rarely to avoid debts.

Prioritize Your Finances

There are certain expenses that you cannot avoid, some that you can prevent, and there are some things where putting your money is a good thing to do. Fixed expenses like electricity bill, transport expenses, monthly gym membership, money spent on buying groceries, etc. are all expenses, which cannot be adjusted or removed, and some amount of your monthly income should be allocated to this. Now, expenses like those on food, drinks, movies, coffee, outings, are all variable and one can choose to reduce these at any time. Apart from this, some money should be utilized for emergency savings and financial investments. The remaining can be kept aside for your additional needs or as an indulgence fund. List down your necessities, variable expenses, investment plans, and put some monthly budget toward each of them. This will help you monitor and channelise your finances in the right direction.

Invest, Invest, and Invest

You may think that you’re too young to get into the serious business of investing. But, is there any age for investing? Many people overlook the importance of investment when they are in their 20s. Then they start planning their retirement once they reach the age of 45-50. That is probably too late. It is not that easy to build a strong retirement portfolio or have the financial security you need within a short span of time. It takes time for people to understand the market, the different financial products, and build a pool of money with their investments. Timing and discipline are imperative to financial freedom. Start early and be disciplined with your investments. Eventually, it’s not how much you earn, but how much you can keep.

You cannot deny the importance of money to survive. It’s okay to let go of some temporary enjoyment for a financially secure future. Follow this guide to financial planning for fresh graduates and manage your finances wisely while fulfilling your dreams.


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