My Decade of Financial Learning: Budgeting Insights for Recent Graduates

Key Takeaways

1. If you’re just starting out as a fresh graduate, cultivating good financial habits like creating and sticking to a budget can help you prioritise how you spend and set you up for future success.

2. No matter how young and healthy you are, we can all encounter costly, unexpected events. It is good to stay prepared early.

3. Take the time to educate yourself about investing, before diving in.

I graduated from university ten years ago, and, like most of my class, I was excited to get into the workforce and start earning my own money. My first job after graduating was hard – long hours and not very interesting. My salary was meagre, but I was happy to be making my own money.

Looking back on those days, I realise I could have done much more financially to set myself up for the future. I didn’t have the knowledge or discipline to make smart money moves when I first started working.

Despite my rough start, I’m in a fairly good place financially now. My partner and I are planning our wedding and want to start a family, so we have built a financial plan and are on our way to achieving these goals. But it’s taken a lot of effort, many years of having to be careful with our spending and a few tough lessons to get here. I’m sharing what I learned so that other new graduates make the most of their first years in the workforce.

I Wish I Had Learned How to Budget and Prioritise My Spending

I was fortunate to secure a job straight out of university. While my salary wasn’t large, I enjoyed having money to spend on the finer things in life. Month to month, I was doing the things I dreamt of as a teen: buying designer clothes, spending exorbitant amounts on nights out with friends, and getaways to exotic places.

Of course, all that spending meant I quickly ran out of money. I would barely have enough to cover my bills at the end of the month, and I had to “eat grass” quite a few times. I knew that saving money for the future was important, but it was never a priority because I didn’t have a plan.

My poor financial decisions eventually caught up with me and things started to change. It was Mother’s Day, and I couldn’t afford to take my mother out for a nice lunch.

“Sorry, Ma. I know I promised to take you and Pa out for dinner after I received my first paycheque. But things aren’t going so well for me right now,” I sheepishly muttered under my breath.

My mother squeezed my hand tightly and forced a smile. Although she tried to hide her disappointment, that feeling broke me. I never wanted her to feel that way again.

Learning to put a budget in place has been pivotal for me. I developed my budget after tracking my income and expenses for a couple of months. By studying the pattern of my expenses, I have a better sense of the amount of money required to ensure that my needs are covered. This way, I don’t get caught short at the end of the month.

To this day, the framework I use is a 50/30/20 budget. Each month, I allocate my pay so that 50% goes towards needs (things like bills and regular expenses), 30% goes toward things I want (which could be a night out with friends or a new pair of shoes), and 20% is put toward savings (for my longer-term goals, like our wedding). I also find it helpful to identify my financial priorities each month so that I’m focused on a goal instead of living aimlessly like I once was.

Automated banking functions have also been a real game-changer. As someone who struggles to remember even my partner’s birthday, remembering to pay bills on time is an absolute nightmare. With a one-time setup, the Citi PayAll feature pays recurring fees exactly when I need it each month.

My second favourite automated function is the Money Goals tool available on the Citi Mobile^® App for Citi Plus customers. Automatic transfers are made toward a goal that I set. Whenever my partner and I have a big-ticket expense coming up for our new home, I simply set up the saving goal on the Citi Mobile^® App and the number of months I would need to complete my target. This method sure beats opening a separate savings account so I won’t be tempted to spend my savings. Paired with the Citi Interest Booster Account, I can earn up to 4.0% on my savings. Unlike other savings accounts, the Citi Interest Account starts with a base interest rate of 1.5% p.a. The extra interest I earn goes a long way.

I wish I had these tools when I had first started my journey towards financial freedom to make saving and growing my wealth easy.

I Wish I’d Realised the Importance of Preparing For The Unexpected

When I left university, I was young and healthy. The last thing on my mind was how to cope in an emergency. After all, I had my parents as a safety net of sorts.

As a soon-to-be-minted family man, the realities and responsibilities have become even more apparent. A colleague of mine, who is married with two kids, just found out he has cancer. He doesn’t have any insurance and only a little in savings. He’s really worried about how his family will manage with his medical expenses.

I don’t want to find myself in the same situation. As daunting as planning for the unexpected is, the sooner you start planning, the better. Although I wish I’d adopted a comprehensive insurance plan much earlier, given the premiums get more expensive with age, I now know that insurance needs change with life circumstances.

I’ve been exploring insurance options that would help cover medical expenses and pay out upon death or critical illness. I have also started setting aside some money from each paycheque to create an emergency fund. The goal is to have enough money in it to cover my mortgage and daily expenses for six months in case of a loss of income. Giving my family peace of mind should the unexpected happen is priceless.

I Wish I’d Learned About Investing Before Trying It

Shortly after my blunder on Mother’s Day, I had a not-so-brilliant lightbulb go off in my head. I realised I could get even more money by investing to make up for my earlier poor financial decisions. My naivete would, unfortunately, incur even more losses.

A friend told me about an investment opportunity and said he was making a huge return. I took out some of my savings and put it straight into the investment. I figured that he and I were smart enough to know what we were doing. The investment turned out to be very risky, and I ended up losing all the money I had put in.

That was an expensive mistake!

I wish that I had taken the time to learn about investing before entering the market. Knowing just a few basic concepts would have helped me make better choices with my savings and prevented my big loss. For example:

• • Learning about risk appetite and how to invest based on my risk profile. Some types of investments come with a high return, but they also come with a lot of risk. It's important to identify the level of risk you are comfortable with before diving in.
• • Dollar-cost averaging involves investing the same amount of money in a security at regular intervals over a certain period, regardless of price. It is a strategy that can help reduce volatility.
• • Diversification is a strategy that mixes a wide variety of investments within a portfolio to try to achieve a good return while spreading the risk.

You don’t have to start investing with equities. Your first venture into investing can be as simple as finding the best interest rate on a deposit account. Then, you might move on to a regular savings plan with mutual funds or contribute to an investment fund for your retirement.

Learn From My Mistakes and Get Started on Your Financial Journey

These are just the lessons I've learned over the last decade.

It may take you a shorter, or even longer, time to figure things out. Your family, finances, career, and personal passions will change over time, so you need to view financial literacy as a journey. You’ll learn something new every day, but the sooner you start, the more progress you will make.

Boost your savings and get ahead on your wealth journey with insights, tools and more with Citi Plus.

Sources

https://www.moneysense.gov.sg/moneysense/articles/2018/10/managing-investment-risk

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