Managing our own finances marks the start of independence and adulthood.
As you start earning your keep, you have full liberty on how to spend your money. Shiok right?
But with great power comes great responsibility.
As new apparel or cafes catch your eye, it is wise to not turn away from “boring” financial management.
After all, your bank account is not a bottomless pit of money, and an overindulgence in what you want right now may compromise your ability to meet your needs in the future.
Before you dive into it, take the first step by understanding some of the terms that your financial advisor or financially-woke friends might have been telling you.
First things first, you will need to set a budget for yourself.
A budget means a good saving and spending plan.
As you have full liberty on how to spend your money, you may be tempted to overspend.
To get started, you can monitor your expenses for a month to understand your spending habits.
In your budget, you should prioritise spending on your needs (e.g. study loans) over your wants, and live within your means.
You should also put aside a fixed amount to save before spending the rest. Save at least 10 per cent of your monthly take-home pay, or more if you can.
You don’t have to live miserably, don’t get me wrong. But you should at least save enough to have an emergency saving fund that is three to six times of your monthly expenses.
One way to help you stick to this saving plan is to automate your savings by setting up a monthly recurring transfer of a sum of money to your savings account. Having separate accounts for spending and saving helps you think twice before tapping on your savings.
Once you are sufficiently prepared for rainy days, you can reward yourself a little more and plan for your next stage of life.
#2: Credit cards V.S. debit cards
Living within your means is the mantra of budget planning.
But the use of credit cards might get in the way.
Nowadays, credit cards are easy to apply for and attractive to get. Earn miles, cashback offers and get free gifts, why not right?
When you use a credit card, you are borrowing money from the bank first, then paying up later. This is different from a debit card, which deducts money from your bank account directly when you use it to pay.
Credit cards can provide many benefits if you manage your spending wisely, but remember that the money you owe can quickly snowball if you do not pay off your bills in full every month. The interest rate for overdue outstanding debt is high, ranging from 24 to 26 per cent per annum.
#3: Life insurance
Fresh out of school salarymen will come to realise that one of the key monthly spendings is insurance premium.
An insurance premium is the money you pay for the life insurance policy or policies you buy.
There are generally two types of life insurance — 1) protection only and 2) protection and investment.
The most affordable one is a term plan which insures you for a fixed period of time.
There are also life-long protection plans and investment-linked plans which come with some form of risks.
It is important to assess your insurance needs before you decide what policies to consider buying.
When in doubt, walk away and give yourself some time to read up before making a decision. There is also a 14 day free-look period for insurance where you can still drop the policy without obligation.
Some of you might be interested in investing as a means of earning some passive income.
Make your money work for you, right?
That said, it is extremely important to be prudent and careful as markets can be unpredictable.
You are advised to invest in products that you have a good understanding of. If something seems fishy about an investment deal or product, ask as many questions as you need to understand it fully, before committing your money.
When pressured to buy, always Ask, Check and Confirm.
Portfolio diversification helps you to manage your investment risk. You can diversify across different asset classes, different markets (local, regional, global) and different industries.
If you are still feeling uncertain about investment, perhaps an interactive mode of learning might come in handy.
Join a virtual carnival to learn how to better manage your money
MoneySense, Singapore’s national financial literacy programme, which was started in 2003, has been organising My Money @ Campus since 2015 together with its partners - The Association of Banks in Singapore, Singapore Management University’s Sim Kee Boon Institute for Financial Economics and Citi Foundation-SMU Financial Literacy Program for Young Adults.
Students learn to be equipped with money management and investment skills through activities and games.
This year, the event will include virtual games and learning booths with bite-sized information that teaches financial concepts. You can win attractive prizes as well.
Welcome to the financial jungle where you fortunately won’t be left to fend for yourself:
Does it remind you of Sims world?
Here are some previews to one of the games:
Participants will stand a chance to win attractive prizes such as Grab and Shopee vouchers as well as an iPad (128GB), Nintendo Switch Console Gen 2, and 2nd Gen AirPods.
This event will be ongoing from Feb. 22 to Apr. 4, 2021.
Join the carnival now!
Top image by Zheng Zhangxin. The writer of this sponsored article by MoneySense and its partners wishes she had known about My Money @ Campus earlier and been wiser with money.