Do you remember the joy and excitement you felt when you got your first job and received your first payslip? It’s an empowering step towards complete financial independence but requires discipline and logical thinking that can only come from experiencing the ups and downs of money management. Here are four insights all young professionals should take into consideration.
Start saving after receiving you first payslip
The prospect of receiving money can be so tempting that you’re already subconsciously thinking of how to spend it before you get paid. Any savings plans you had set for yourself likely went out the window, and before you knew it, you’d spent your whole payslip on unnecessary items.
Warren Buffet said it best: “Do not save what is left after spending but spend what is left after saving.” It would be best to re-evaluate your priorities by understanding and implementing realistic budgeting practices – setting aside a certain amount of money for savings should be your first step.
It’s best to start sooner than later because it’s easier to save money before you are introduced to spending it in the first place. Furthermore, it also gives you the motivation to set goals and find ways to accomplish them. This can be seen as your source of inspiration and provides a benchmark to track your progress.
Personal finance is personal
Everyone has different priorities; it’s crucial that you align the financial decisions you make with your goals. Buying a car may be a priority for colleagues and friends; if it’s not yours, don’t be persuaded to veer from your goals. The biggest lesson to learn here is that personal finance is not just a term; the way you manage your money can affect your personal financial wellbeing. Discipline is the key to success.
Do everything you can to avoid bad debt
Budgeting can put your goals into a realistic perspective, and you’re likely to find you simply can’t spend impulsively anymore if you want to reach your aim. It’s vital that you’re honest with yourself and accept your current financial situation. You may not want to change a lifestyle you’ve been accustomed to and as a result borrow money through loans and use credit cards to supplement the shortfall. This can lead to unnecessary debt you may struggle to pay back.
Reap the rewards of compound interest
Albert Einstein is often quoted as saying, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”
In other words, if you are in a lot of debt and borrowing money to make the payments, compound interest is going to work against you.
However, should you have the foresight to start investing from a young age, budget correctly and keep variable expenditure to a minimum, you’ll reap the rewards of compound interest.
Have these tips resonated with you, giving you the motivation to start saving, but you are unsure where to start? Consider speaking to an independent financial adviser. They can provide you with the knowledge you may need to make informed decisions for your financial future.