Remember all the advice your parents gave you when you were a kid? Do your homework, don’t get into a relationship, and score those As. Not always easy to follow, but simple and straightforward nonetheless.
But now you’re on the cusp of adulthood—and suddenly, your parents don’t have much advice to give you, other than to get married and BTO.
So how do you handle this adulting thing without bringing about your financial ruin? Here are four things you need to understand.
The credit card company wants you to miss your payments
Once you start earning a real, grown-up salary, there’s a high chance you’ll start signing up for credit cards. Now you can finally pay for stuff using a real credit card, rather than your debit card.
But unlike a debit card, credit cards come with a lot more responsibility. You’ve got to make sure you pay your bills on time every month, otherwise you will get slapped with a late payment fee of over $50. If you don’t have enough cash to pay your bills in full, be prepared to get charged interest.
Here’s the thing: the bank isn’t going to make it any easier for you to pay your bills. Don’t expect a reminder, as most banks will happily let you miss your bill payments with nary a peep.
And don’t be fooled by that nonsense about the “minimum payment”. If you don’t want to get slapped with interest, you have to pay every cent on that bill. Making the minimum payment just means the banks gets more of an excuse to charge you interest, while making you feel satisfied that you at least paid enough to not get harassed by them.
The truth is, banks do not want you to pay your bills on time, nor do they want you to pay them in full every month. Because the late payment fees and interest are exactly how they make money off you.
Money isn’t power if you spend it all
Many Singaporeans live by the adage that money is power. And it’s a sad fact that you generally get more respect in this country if you’re driving a Ferrari than if you’re the guy washing that Ferrari.
But money is power only if you have enough of it in the bank and in investments to give yourself the financial freedom and the peace of mind you want.
On the other hand, if the only money you have is the cash you conspicuously spend, that’s a façade that can crumble all-too-easily.
So, for young people who’re entering the working world, don’t be too tempted to compete with your friends in the Instagram rat race. Your money is powerful only if you use it wisely—and that usually means in ways that your Instagram followers will never see.
Don’t put it off
Only the most uncreative person can say with certainty that there’s nothing he can do to improve his finances.
For most of us, there are always little ways we can plug money leaks, our give our incomes a little boost—for instance, by downgrading our mobile phone plans, buying groceries so we don’t have to eat out or using an expenditure tracking app to monitor our spending to ensure we don’t bust our monthly budget.
Those who are dissatisfied with their income can also do quite a bit to boost it—calling a tuition agency and registering as a freelance tutor, selling unwanted belongings on Carousell or signing up as a pet sitter on Pawshake, for instance.
The real reason most of us are doing nothing of the sort is because we’re too lazy. When it comes to money, especially investing, it’s better to do it sooner than later thanks to compounding interest. So don’t put off your bright ideas any longer.
Spending within your means requires sacrifice
As a kid, spending within your means wasn’t something you had to worry about. If you didn’t have enough allowance to buy something, you just went without, end of story.
But as an adult with the responsibility of saving and investing for your future, and with the lure of easy credit ever present, it is very easy to fall into the trap of living a lifestyle you can’t afford.
Here’s the thing—living within your means (or living modestly enough to enable you to meet your financial goals) often requires you to make sacrifices. Unless you have simple tastes and a modest lifestyle, you’re probably going to have to go without some of the luxuries you enjoy, whether they be rabid cafe hopping sessions or ASOS shopping sprees.
Do you have any advice for other young adults entering the working world? Tell us in the comments!