Sometimes, I wish schools would teach useful life skills. After I squandered my first few paychecks and ended up slurping instant noodles for lunch in the pantry at the end of the month, I realised I was sent into the working world with no idea how to manage the money I was earning. I had to learn on the go, read up or talk to friends and advisors about it.
If you just started earning from a job or receiving some money from a side hustle, here are some tips on how you could be wiser with it.
This article is adapted from Senior Say, an event where seniors share about how they navigated poly life, with Ngee Ann Poly Aerospace Tech alumni turned financial consultant, Brandon Lim.
Disclaimer: Fiinancial planning looks different for everyone based on different situations.The below references an opinion and is for information purposes only. The content of this article is not investment advice and does not constitute any offer or solicitation to offer or recommend any financial product. It is for general purposes only and does not take into account your individual needs, investment objectives and specific financial circumstances.
Step 1: Assess your current financial situation
The first step to any journey is to find out where you are. Assess your current financial situation and accept your current financial position—whether you have income every month or if you already have some savings, whether you have taken up a student loan or maybe a credit card debt. Whatever your situation, you’ve got to know what you’re working with to make a good plan.
The two things you would need to look at are your net worth and your cash flow. If this is your first time hearing these jargons, let me explain what they mean. To put it very very simply, net worth is your asset (anything that you can turn into cash or is cash) minus your liability (anything you need to pay or you owe). Cash flow is your income (money you receive) minus your expenses (money you spend). If you want to know more, a quick Google search will provide you with more in-depth information.
Step 2: Identify your financial goal and have a plan
After finding out where you are, next, find out what you want. It could be something as simple as always keeping your bank balance above $0 at all times, contributing some money to your parents every month, taking care of your own phone bills, or making a monthly investment of $100. It could also be something bigger, such as paying off your student loan, saving your first $5,000, or something even further in the future such as buying a house or planning for retirement.
You could also have a mix of short term, mid-term and long term goals. Here is a simple comic by The Simple Sum on Setting Goals.
Truth is, sometimes even simple goals can seem daunting and it stops us from taking the first step. Hence, break down the goals you have set for yourself into smaller goals or steps!
Here are some links by The Simple Sum that you might find helpful if your goals are to:
Save more money
Be debt free
Invest
Step 3: Look for a financial advisor
After you are clear on what you want to achieve, it is time to seek advice. While it is great to speak to friends and family members about your financial goals, sometimes they may not be the best choice as they have their biases or own views because they have different financial backgrounds.
You could always look for financial advisors who have more experience in dealing with different financial backgrounds and have learnt more about financial planning to provide a different perspective.
Always remember that you should not feel pressured to buy any financial product you do not feel ready to take on. It is alright to say no to anything you feel uncomfortable with. You can also seek advice from more than one financial advisor, so meet a few more and do your research before committing to any saving, investment or insurance plan.
Step 4: Execute!
The last step is to put your plan into action. After going through all of the above steps, do what you have planned and stick to it. Trust the process.
Maybe you have regrets for not saving your part-time job earnings, internship allowance or your entire first year of income as a working adult; I did. It would have been great if I received such valuable advice back then so that I can start managing my money earlier, but you know what? The second best time to start is now.
