Finance Management: 6 steps to manage your finance at the start of your career

Got your first job and wondering how you can be financially responsible. No doubt you want to manage money effectively. Managing your money well at this point will benefit you as you grow older. Your first job and your salary will have a big impact on how you manage your money, hence you want to get it right.

Considering that it’s your first job, you probably have many plans for your salary. For example, buying a new phone, giving your social circle a treat, or gifting your parents something special. But are any of these examples a good way to manage money effectively?

In this article, we’ll take you through 6 steps you should consider to manage your money at the start of your career. If you are able to manage your money well now, you will definitely be able to do so when you begin to earn more as you move up the career ladder.

Step 1. Know your Expenses

It is critical that you are completely aware of how much you spend on a daily and monthly basis.

What should your expense list include?

  • Grocery costs
  • Transport and fuel costs
  • Rent costs
  • Electricity costs
  • Entertainment costs such as going to the theatre
  • Clothing costs

These are just some of the expenses that you incur regularly. By noting down your expenses, you are aware of where your income is spent. The challenge lies in ensuring that you note down all your expenses. You can do so at the end of the day on a piece of paper. If you have a smartphone, you could also download an expense tracking app and note an expense every time you make a purchase.

Step 2. Categorise your Expenses

After a week or a month of tracking your expenses, you should be aware of all your expenses. Now it is time to categorise them into two categories. One is the necessary expenses and the other is luxury expenses. By simply doing this, you become more aware of your spending habits, and which spendings are completely unnecessary. For example, you might realise that you are too dependent on eating food from restaurants and the constant expenditure is taking a toll on your limited income.

Step 3. Start Saving

Saving is an important aspect of financial management. Your expenses should neither exceed nor be as exact as your income. Instead, your expenses should be lower than your total income. It’s recommended that you save at least 20% to 30% of income. However, each individual faces different financial burdens and there is no one-size-fits-all answer.

The best possible advice is to save how much you ever can. Having sufficient savings is necessary if you want to make a big expense or require money for an emergency scenario.

Step 4. Begin Investing

You should make money work for you and a good way to do so is to invest. While saving is a must, your savings does not grow. However, by investing, you are able to make your money grow. The key to good investing is to not look for quick returns. Here’s where you can start investing in:

  • CPF: Investing in Central Provident Fund (CPF) is a must. It’s an investment plan that assists Singaporean residents in their housing, healthcare and retirement needs.
  • SSB: Singapore Saving Bonds are the safest investment you can make as they are backed by the Singapore government.
  • Blue chip stocks: Blue chip stocks, listed on the Singapore Stock Exchange, are recommended to investors who are willing to take risks and are looking for a long-term investment.
  • Mutual Funds: A mutual fund is a collective investment that is managed by professionals, and is a good investment option.

Step 5. List your Financial Goals

For long-term financial planning, it is essential that you identify financial goals. A financial goal may be owning a house or going on a vacation. To identify your financial goals, list the things you want in life. Here’s what your list might have:

  • Buying a new phone
  • Owning a house
  • Buying a car
  • Going on a vacation to Europe

Each of these also counts as financial goals.

Furthermore, you should divide your goals into long-term and short-term goals.

Long-Term Goals Short-Term Goals
●        Buying a car

●        Owning a house

●        Buying a new phone

●        Going on a vacation to Europe

Step 6. Create a Budget

Creating a budget is the ultimate step if you want to manage money effectively. A good financial budget will account for all the elements mentioned above. It allocates funds for:

  • Expenses
  • Savings
  • Investments

A good budget identifies unnecessary spendings and reduces your expenses. In turn, this maximizes your savings. It can help ensure you have sufficient funds for your investments. More importantly, a budget will contribute to helping you achieve your financial goals.

Create a budget and stick to it.

The moment you start your own career, you also become financially responsible. You want to manage money effectively so you live a comfortable life. Use these 6 steps to manage your finance and be financially responsible.

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