Fresh graduates and young professionals tend to be gullible thinking that the world is theirs to conquer, only to be gobsmacked by debt and financial upheavals when reality finally bites. Financial stability is a concept amiss to them; it’s an idea that they know they should aspire to attain, but not urgent enough to prioritize.
Financial stability means differently to different people. The following, however, is a simple checklist to know if you are financially stable:
- You have enough money to pay your monthly bills.
- You do not always resort to borrowing money.
- You have buffer savings or insurance in case of an emergency.
- You save at least 3% of your income.
This guide is designed for fresh graduates and young professionals to kickstart their journey towards financial stability for a brighter future:
1. Eliminate unnecessary expenditures
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With the first sweldo comes great purchasing power and great responsibility. Earning money for yourself is an exciting part of starting your own career. However, there are many things to consider first before you spend your money on unnecessary things. Several fresh graduates spend their first salary on tacky and senseless expenses.
Financial stability is more difficult to achieve when you just started with your career. Impulse buying will quickly siphon your salary and savings. This is why you must be systematic in avoiding this.
One achievable goal is to list all your expenses every day for a week, no matter how small your spending is. Create a table of your expenses using basic applications such as Microsoft Excel.
Place the items you bought on one column and its price next to it. After a week, you now have a complete record of your expenses. Tally the amount you spend each day.
Once you have done this, you may now go to the elimination stage where you highlight all the items in your list that you could have avoided buying. That extra doughnut or merienda you’re buying on your way back to your place after work may just add up to 5% of your total expenditure for a month.
By also knowing the average amount you spend in a day, you can set your daily allowance equal to that average. This will keep you from spending beyond your set allowance.
Having a visual representation of your spending assists you in monitoring your spending. You’re already heading to financial stability and freedom once the shaky ground of your early financial situation is controlled.
2. Compartmentalize your money. Literally
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One effective way to achieve stability is to compartmentalize the money you earn.
Compartmentalizing your earnings means you are allocating and distributing your monthly salary to your bills, weekly, and daily expenses, savings, emergency money, and even leisure money.
This is easier said than done since fresh grads don’t know how to methodologically divide their money for specific expenses. Fresh grads and young professionals need to know how to manage and save money for their future.
If you are clueless as to how to do this, you could try the envelope system. This system helps you to sort and divide your earnings with the help of actual envelopes. To do this, just purchase several envelopes. You could opt to buy colored ones if you want to be more organized. Label each envelope with each expense that you need to allocate money to. You could also make a colored system to indicate that yellow is for the electricity bill, and pink is for the water bill.
When you get your salary, immediately place the amount of money that you will allocate in each of the labeled envelopes. You can predict how much money you need to place by following step one of this guide to monitor your bills and expenses. By using the envelope system, you have tangible compartmentalization of your expenses.
You could also use the envelope system for each day in between your paydays. The envelopes will contain your daily allowance.
3. Make intelligent decisions
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Achieving financial stability is not just about making smart financial and economic decisions. It’s also about making wise, strategic, and informed life decisions.
As a young professional, choosing among the plethora of job offers, for instance, could be a predicament. Job offers with high salaries are what everyone is looking for. However, when choosing which company you would work for, you also need to consider other factors such as its location, benefits, and its history and background.
For instance, a high paying job that is 2 hours away from your house could end up causing you more expenses. Because aside from the horrible commute that could induce stress and cause you to impulse buy to alleviate the pressure you’re feeling, you might also face more expensive renting rates if you plan to move since the cost of living there could be higher than where you are living.
If for example you still choose a higher paying job, you need to consider several options to save money. Getting yourself a roommate for instance dramatically cuts down the cost of paying the rent. Evaluating and ruminating on your choices is a key part of finally attaining financial stability.
4. Try investing your money
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Let your savings grow with investment plans. There are several options for you such as pooled investments and bond investments. You could also earn your first million in college if you familiarize yourself with these kinds of plans.
Polled investments is a portfolio of cash from several investors that form a coalition for the purposes of investment. Investment companies such as COL Financial, Philequity Management Inc. (PEMI), and ALFM Mutual Funds can assist you on how to start with mutual fund investments.
Meanwhile, you can also try bond investments. Bonds refer to loans granted by large organizations such as the government, private corporations, and different bank branches. Bond investment, in this sense, is a kind of debt investment in which the bond issuer pays you, the bondholder, a specific amount for the agreed fixed maturity plans.
5. Save smarter
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The most important aspect of achieving financial stability is your ability to save money. Saving money is not simply about accumulating salary for a distant future such as for retirement. It is also most definitely not about saving to get enough money for that expensive gadget you want. Saving, instead, is possessing emergency money as a way to safeguard yourself from unexpected expenses such as accidents and sickness.
If you’re still unsure of investing, you could consider looking for other options such as getting yourself insurance. An insurance is a smart way of saving because you are prepared for any unexpected incident or event. This is definitely better than leaving your money sitting in your bank.
6. Invest in your skills
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Working in your dream job does not always mean that you are earning enough to achieve stability. While it is true that working in an environment you actually enjoy eliminates the added toll of stress you’ll face every day, it sometimes still won’t be enough to pay for your bills at the end of the month.
Getting yourself an extra part-time job could help you deal with financial burdens. Invest in your skills. Ask yourself what you are good at, and use this to score part-time freelance gigs.
You could consider becoming a weekend tutor for young pupils. Pursue your dream to become a teacher by becoming an ESL (English as a Second Language) teacher online. Become a photographer in events. Accept commissions for artworks if you are good with art. Write for companies looking for content writers.
There are many ways you can pursue an extra paying job without having to deal with the added stress. Do what you love, and earn from it.
7. Compare notes, but do you
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There is no one way to achieving financial stability. You could attend free seminars about financial planning, compare your budgeting strategy with your friends and colleagues, and read blogs about attaining financial stability online.
Learning how other people achieved stability is important for it expands your knowledge about financial matters. But remember that people are coming from different contexts, backgrounds, and experiences.
Consolidate the strategies of financially stable people, then tweak and personalize to match your own. Most importantly, you could innovate on your own to best suit your financial situation.
Don’t bring yourself down in comparison with others. It doesn’t matter if you are smooth sailing towards stability at a slower rate. What’s important is that you are on your way there. Financial stability and financial freedom is definitely an achievable long-term goal. With the help of this guide, you can definitely develop a plan to attain this dream.