So, you graduated and landed yourself your first real job.
A month later, “Ka-Ching” – You receive your first salary.
Possibly, it is the largest sum that you have ever earned or seen in your bank account.
Congratulations!
Now, if you are reading this, I’m positive that you are seeking ways on how to manage them wisely so that you can position yourself towards financial independence.
Otherwise, you won’t be here.
In that sense, you might belong to the minority that want to achieve abundance in life.
With great aspirations, it is crucial to first take baby steps to manage your finances prudently. It’s a starting point towards building an investment portfolio, buying real estate, funding a wedding and starting a family. Ultimately, as a 30+ year old, I can testify that what you do in your 20s as a fresh graduate can impact how comfortable you will live in your 30s.
To get you started, here are 5 quick tips to manage your salary wisely:
1. Get Medical Insurance in Malaysia
Assuming you have zero insurance.
The first thing to do is to shop for medical insurance to insure against the cost of medical bills.
There are two ways to buy medical insurance.
First, you could buy it as a standalone product, also known as a standalone medical card. Today, it is possible to get one which offers decent benefits at a premium below RM 100 a month. So, if you are looking for budget-friendly options, this would be great to consider.
Second, you can buy it as a package under an investment-linked insurance policy. Here, under this arrangement, you’ll buy a medical card together with life insurance and unit trust. Since it is sold in a bundle, the monthly premiums are higher. Usually, the medical benefits offered are greater than a standalone medical card. So, if you have a pay raise, you may consider an upgrade to this policy as the medical insurance coverages are more comprehensive.
2. Build an Emergency Fund (At Least 6 Months of Living Expenses)
Are you naturally a saver or a spender?
If you are a saver, you’ll naturally save a portion of your income.
When you save, you feel responsible. You are accomplishing a financial goal. With cash in the bank, you feel a sense of comfort, peace, and certainty.
But, if you are a spender, saving may not come naturally to you. Perhaps, this is because it’s nice to convert cash into tangible items that can be worn, touched, felt and experienced. Spending could also be therapeutic as it may satisfy your five senses.
So, what can you do?
Well, you have to find a way to deal with it. For instance, you can open a bank account designated to stash money. Here is how it works. Every time you collect your salary, you shall deposit a portion of it into that bank account and “forget about it”. No withdrawing it. No spending it.
Generally, a good start is to have cash equivalent to around six months worth of living expenses in a high-interest savings account set aside for emergency purposes.
3. Use Credit Cards to Build Credit Profile
If you tend to spend more than you earn, skip this part. It’s not for you.
If you have the ability to control your spending, you may apply for a credit card.
It doesn’t matter if the card offers the best deal in terms of cashback or treatpoints. Here, the key thing is to get one to start building your profile as a creditor. This is an important step towards you applying for a car loan or a mortgage in the future.
So, if you have a credit card and you manage to pay it on-time and in full (not incurring interest), it is possible for you to have a decent credit score. Bankers view you as being creditworthy and shall be more inclined to have you as a borrower. Thus, it helps on your loan applications in the future. If you are looking to buy a home or build a real estate empire in the future, this can be your first step to greatness.
4. Buy a Cheap Car
Speaking of transportation, if you are driving your parent’s car, please continue to do so. If you are renting somewhere near public transportation facilities, please do so. Financially speaking, it’s best to not own a car, which is almost certain to depreciate in value.
But, if you are a fresh graduate and you really need a car to move around, you may shop for a car that costs below RM30,000. Keep your monthly repayments below RM500. This could save you on depreciation cost, maintenance, road tax, petrol, and interest costs.
It may not sound sexy at the start.
Your peers may buy RM 90,000 cars with RM 3,000 monthly salaries and it seems that you kind of are not keeping up with standards in the present.
But, the present is fleeting.
Food for thought – How many of these peers will have bright financial futures?
So, if you want to have financial abundance in the future, you have to be intentional about it when you are in your 20s. One of the steps to take is to cut the amount you spend on a car.
5. Have a Network Fund to Build Connections
The first four are about defense.
They are basics that position you towards financial abundance.
But still, if you earn below RM 5,000 a month, you have limited choices in investing.
So, the goal here is to increase your income.
There are many ways to raise your income. There are some who do side hustles. That’s great and if these side hustles could become full-time income, that’s even better. This is just one of the many routes that you can take. But, it’s not for everyone.
Here is one easier route to raise income which is less considered by fresh graduates.
It’s what I call a Network Fund, which is cash set aside to build connections, seek mentorships and learn from people earning more than you. You can use it to buy a mentor, your clients, your boss, a friend who is geared for growth and successful people in your field a cup of coffee. In exchange, it allows you to ask meaningful questions that allow you to learn, grow and develop your career.
Let’s say you are in sales and earn RM 3,000 a month.
You don’t need to find Tan Sri’s or Dato Seri’s to start with.
But, how about people who are earning RM 8,000, RM 10,000 or RM 15,000 a month?
Can you approach and learn from them?
If you are humble, have the ability to sit down and listen, and take action, there’s a good chance in the next few years that you could be doubling or even tripling your monthly income.
Such an investment can be an investment in yourself.
Conclusion:
Although basic, the five listed above are fundamental starts to one’s financial success.
If you can earn more than you spend, stash the balance in a high-interest savings account, have a network fund and time set aside to building quality connections, you are moving in the direction of earning higher income in the near future.
That would be a strong start towards living a rich and abundant life.
The choices that you make in your 20s can compound greatly to your 30s, 40s, 50s and the rest of your life.
So, be intentional and be disciplined about it.
See you at the top.
