That doesn’t mean you can waste away spend your salary on a spree. Once you graduate from college and get start to find a job, you must start learning to be independent, both emotionally and financially.
Financial independence doesn’t just mean that you’re able to finance all the necessities of life by yourself without the any help of from your parents, but also capable to manage finances and build a brilliant financially bright future.
Managing finances is not easy, especially for a fresh graduate who doesn't really understand finance. It's only natural that you often make mistakes in terms of financial management.
That’s why we summarize the five common mistakes made by fresh graduates so you can anticipate or overcome financial problems.
Lazy to learn
Being lazy is a human nature that leads to negative impacts. Your monetary condition can be affected simply by being too lazy to learn about financial-related information, let alone too lazy to invest your funds.
By figuring out your financial profile and gaining as much knowledge and insight as you can, you can formulate ways or apply the most appropriate method to manage your funds. That way, your newly received salary won’t run out right away.
Most fresh graduates always use their first salary on a spree, from eating luxuriously to shopping for new clothes or shoes. Doing it once won’t turn into a problem. If it becomes a habit, however, it will cause long-term financial problems.
Try to make a spending budget every month and make an effort to comply with the plan. This is important if you want to have the remaining salary to be allocated to savings and investments.
Not setting aside income for emergency funds
We will never know for sure what will happen in life. Being young doesn’t mean that you’re free from the risk of life, whether it's an accident or a layoff. At times like this, you need an emergency fund that can be used at any time.
Unfortunately, a lot of people haven’t realized the importance of setting aside some of the income for emergency funds, using excuses such as small salary or more urgent needs to meet. From now on, shift your priorities by allocating part of your salary to the emergency funds post rather than the entertainment budgetpost.
Ideally, you need cash or liquid assets for your emergency funds, amounting to six times of your usual expenditure in a month. As a first step, you can start preparing at least 30 percent of the target emergency fund.
Falling into the wrong debt
To meet the demands of their lifestyle, many fresh graduates are willing to owe money. The question is, can we be in debt? The answer is yes, as long as it’s a productive debt and the installment value is no more than 35 percent of your income. Productive debt itself is a debt which purpose is to obtain financial benefits and the value of the goods tends to increase, such as a house or a business.
In contrast to productive debt, consumptive debt doesn’t provide financial benefits or the price of goods decreases over time. Some examples of consumptive debt include buying the latest smartphone or traveling abroad for holidays.
Delaying having insurance
Most fresh graduates choose to put off having insurance for various reasons, from not having enough money, not knowing the suitable insurance product, feeling it’s too early, or thinking that the process is too complicated. That’s not the case.
Currently, insurance comes in a variety of product options that can be adjusted to your financial condition or future needs. In addition, the purchasing process for premiums has become much easier.
With insurance, you can also invest at the same time. The benefits you can earn far outweigh regular savings. That’s why insurance is one of the things that you must have as soon as possible.