Budgeting

5 Money Mistakes Fresh Grads Can’t Afford to Make

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Joanne Poh

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Getting your first job should mean you’re no longer broke. But the bad habits of many local graduates have made them worse off than when they were jobless, judging by the shocking proportion of young Singaporeans with no savings.

Your 20s can make or break the rest of your financial life. Force yourself to save and invest even a modest amount and thanks to compounding interest you might find yourself feeling much more secure later on in life. On the other hand, YOLO to the max and you’ll find yourself wishing you had the chance to live your 20s once more. Here are 5 mistakes fresh grads should avoid like the plague so as not to live a life filled with financial regrets.

 

Rushing to increase your monthly expenses

Even the most modest full-time paycheck can seem enormous when your previous job consisted of scooping ice cream for $5 an hour. So it’s unsurprising that many fresh grads rush to increase their monthly expenses the moment they get their first real job by signing up for gym memberships, magazine subscriptions and spa packages or committing themselves to big purchases they can pay for in installments.

One day, you’ll come to realise that people try to minimise their financial liabilities in their bid for financial freedom—and that by signing up for the first package some salesman tries to sell you, you’re actually doing the opposite.

 

Putting off investing till you’re older

If you’re earning enough to save money each month, it’s time to start thinking about investing. Many fresh grads are totally clueless about investing, and this ignorance will cost them in the long run as their savings get eroded by inflation.

Those who do learn how to invest, on the other hand, have time and youth on their side, and will see their savings grow tremendously over the next few decades. Don’t put off learning how to invest to when you’re older. The best time to get started really is now.

 

Paying the minimum on your student loans

Sorry to burst your bubble, but paying as little as possible each month on your student loans does not make them shrink to the point where they’re negligible. In fact, by spreading out your loan payments over a longer period, you’re not only extending the amount of time you spend in debt, you could also be paying more in interest overall.

If you’re lucky enough to be young and unencumbered and have no other pressing financial obligations, it’s a good idea to pay off your student loans as quickly as you can.

 

Saving too little

Sure, YOLO and all that, so go ahead and buy that Chanel bag. But if you think saving is hard now, you have no idea how much harder it will be when you get older and more liabilities and responsibilities start piling up. The best time to save is actually now. Save and invest your money now and you’ll have a lot more peace of mind when you grow up and life starts throwing you curve balls. Wait till you’re much older to save and you’d better hope you’ve got a good job as you’ll have to save a lot more in order to retire, as your investments won’t have as much time to grow.

One easy way is to automate your savings. Open a separate account for savings, and then automate the transfer of a set amount of money each month from your main account to that account. Call up your bank if you have no idea how that’s done.

Also, from now till 31st December 2016, if you started your first job this year and your salary is going into a DBS/POSB account, you might get bonus savings of $100. Just register for the DBS First Jobber promotion before the end of the year.

 

Splurging every time you get paid

Getting paid feels particularly awesome when you’re a fresh grad (although trust us, in a couple of years you’ll probably end up grumbling every time your pay gets credited into your account). In fact, it can feel so awesome that it inspires you to spend everything you earned that month on drinks for everyone at your favourite club, including the bouncers. Or maybe blowing your entire paycheck on 5 years’ worth of new outfits is more your thing. While we’re not so cruel as to suggest you never, ever treat yourself, you need to get it into your skull that receiving the month’s paycheck is not a reason to splurge.

What mistakes have you made as a fresh grad? Tell us in the comments!

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.

  • yrmums

    This article is as insightful as my neighbour’s dead chihuahua.so poorly written.