Become financially smart at young age

The saying goes, you’re only young once… so live your life to the fullest.

Yes, it is certainly true that people are only young once. Youth seems to fly by so quickly and before we know it, we find ourselves beset by responsibilities, obligations, stress, worries and most undesirable of all..grey hairs! ? So yes, you might as well enjoy youth while it lasts…

But even if you are a young adult today, there is no reason why you should not plan for the future. The future is inevitable. Each day brings us closer towards it, whether we like it or not. So, the sooner one starts preparing and planning, the better in the long run.

Here are some helpful financial tips to pique your interest in taking charge of your financial health.

Start saving and keep your debt manageable.

As a young adult having just entered the workforce, you may or may not be aware of the pitfalls of living above your means. The reality is that one does not earn much starting out, especially in Malaysia.

So your take-home pay will be nothing much, at first. And, things can be especially deceptive if you still live with your parents. This is because most of the expenses for the basic necessities of life such as food, board and lodging, laundry, utilities bills and miscellaneous other expenses, will be covered by your parents, so you might think that the amount that you have to spend every month on your own entertainment and luxury items purchases is “all” you need to worry about.

Well, not quite. Because one day, you will be living on your own and taking care of all these “invisible” items, from your own paycheck. So you need to be aware right from paycheck No. 1, of the need to budget and set aside money for necessities.

Even if your parents end up picking up the tab, the money put aside can be banked into a savings account. Do not simply spend it on the latest gadget. Do not rack up huge credit card bills and assume you can just pay the minimum balance. This may seem like a cool way to buy things you otherwise can’t afford, but it is not.

The interest charged on the outstanding balance can compound very quickly and leave you with a huge debt on your hands. Avoid consumer debt at all costs. Budget carefully, save what you can and don’t spend on credit.

Build up a Specific Events Fund.

So, in anticipation, develop a forward-thinking mindset now itself. Start up a fund for emergencies and/or specific events. At some point down the road, the likelihood is, you will buy a car, get married, buy a property, start a family. All these require a financial base.

Saving for wedding is a very sensible thing to do

You cannot “start” saving for your wedding only after you and your partner have fixed a wedding date. You need to have put at least some money aside, earlier. The same goes for a property. You must have access to substantial liquid funds in order to proceed with a purchase, even if you are planning to borrow most of the funds from the bank.

So, start saving money towards these big ticket items, now itself. Put aside a little every month and do not be tempted to “dip” into it.

Keep working, and study part-time.

Parents from the previous generations often extol the virtue of a good education. They are happiest when their son or daughter is studying for a degree or post-graduate qualification. They firmly believe that their children’s chances in life will be greatly enhanced by obtaining as many qualifications as possible.

Well, the reality is that while qualifications are important, they are no longer worth as much as they used to be. For the simple reason that just about everyone nowadays, has a degree, a masters, a PhD. Any Tom Dick and Harry can get pretty much any qualification they want, just on the internet!

So in these days of mass democratization of education, qualifications are now a dime a dozen. Money is the real deciding factor of quality of life, not education. So, by all means pursue additional qualifications. But do not “take a break” from your job in order to study.

You will not only incur costs to further your studies but will lose out on the income (and the EPF contributions from your employer) that you will get as an employee. So, keep your job, and study part time. There are plenty of options out there for the lifelong student.

Invest and take up health insurance early.

Life is unpredictable. When you are young, the world is your oyster and you feel invincible. But that feeling soon fades away, as early as around the age of 30! Sometimes early onset health complications and lifestyle diseases can already start to set in, around that time. So when is the best time to take up health insurance? Yes, in your early twenties – before any health complications have set in.

Your premiums will be low and manageable. You can lock in an insurance package loaded with benefits at that age. Never, ever make the mistake of waiting till you are in your late thirties/early forties to take up insurance. Same goes for savings. Plan for your retirement from day 1, do not wait until you are in your fifties to think about it.

Open a savings account and develop the discipline to keep setting money aside and banking it into this account. One helpful tip is to set up an autodebit facility where a specified, fixed amount is debited from your salary straight into your savings account (before you have a chance to spend it on the latest smartphone, tablet or phablet!) ?

Set aside time to review your finances, and learn about money. Contrary to popular belief, the only person who is going to help you manage your money effectively and increase your net worth, is you. It is not a so-called “wealth planner”, who is usually there to push the product being sold by his or her employer, either an insurance company or a bank.

You must take responsibility for your financial well being at an early age. You must set aside time every month to review your financial position, track your expenditure, record your savings and investment gains, monitor your cash outflows, review your financial goals and develop strategies to increase revenue and maximize returns on your financial portfolio.

Read everything you can get your hands on relating to finance. Learn how to analyse financial statements, understand investments, and how do basic accounting.

Eventually, everything boils down to finance. Those with an educational background in finance, are at a clear advantage. For the rest of us, it doesn’t mean we have no chance to build up our personal wealth over time. It just means we have to work harder to educate ourselves. Starting young makes all the difference. Don’t waste a single day in terms of building your financial future! ?


Personal finance author and trainer

    1 Response to "How to be Young but Financially Wiser than Your Older Peer"

    • ethan

      Does it make sense to save in Foreign Currency accounts?

Leave a Reply

Your email address will not be published.