Where Should Your Salary Go? Top Financial Tips for Fresh Grads

As a fresh grad in your first job, earning money can seem very exciting. You can buy all the things you want now! Or can you? Having more money than you’ve had before can also be overwhelming. You might have money one day and lose it the next. So how should you spend it? Where does it go?

Fresh grads and young professionals need to listen to sound financial advice if only to avoid potential pitfalls and money problems that can be harmful in the long run.

But financial literacy can take a while to understand, so don’t worry if you don’t get the hang of it just yet. As you start your savings journey, you’ll realise that you’ll encounter common financial issues as you go along. Below are five of the most common money problems young professionals go through. If they sound familiar, that’s because you’re not alone.

Read on to learn how to solve these issues and avoid them moving forward.

Common Money Questions Young Professionals Ask

1. “Where does all my money go?”

Fresh grads are the most common victims of mysteriously disappearing money because they’ve yet to develop the keen sense of financial “intelligence” that most seasoned professionals have. But this doesn’t mean that you should let this problem persist.

The problem: You have tiny little “leaks” or, in some cases, big “holes” in your budget, which is why you can’t keep track of where your money is going.

The solution: Create a monthly budget to monitor your expenses. Budgeting apps available online can make accounting easier for you. If possible, only pay in cash instead of swiping your card left and right. It will make you more aware of how much you are spending. Finally, keep all the receipts of your purchases. This way, you have concrete, physical proof of how much you have been running through.

2. “How come budgeting never works for me?”

When done correctly, budgeting can help you cut down on expenses and save some money. However, the concept of budgeting goes beyond tracking expenses and restricting yourself from buying something because “it is not on the list”.

The problem: You consider your budget a list of what and what not to buy rather than a plan or course of action you must strictly follow.

The solution: Treat your budget as your financial roadmap. You need to stick to it and constantly improve it so that you will save more and more over time. Note that the first three to four months of budgeting will be rough. But as you move forward, you will see that it gets easier to follow your plans. Once you’ve mastered the art of budgeting, you’ll be able to plan your expenses accordingly without much effort and difficulty.

3. “Is it payday yet?”

You have spent almost all your money yet you still have a week to go before your next paycheck – what do you do?

The problem: You spend too much and save too little (or not at all). Unfortunately, you have a short-sighted view of your finances.

The solution: While there is no shame in living paycheck to paycheck, it can be tough to be stuck in this situation when a few simple tweaks in handling your finances could solve the problem. Carefully tracking your expenses and budgeting your spending can help you break the cycle. If you can’t let go of certain expenses, consider finding multiple income streams or a part-time job so you won’t have to depend on your basic salary too much.

4. “Why haven’t I saved anything?”

Being able to buy things on your own is just one of the pleasures of being a young professional. However, spending can also get out of hand. You might find yourself not being able to save at all.

The problem: You put your purchases first and your savings second. You prioritise your immediate expenses and spend most (if not all) of your money on things you think are essential. Sadly, you end up with barely enough money left to maintain a savings account.

The solution: Think of savings as an expense. Prioritise this as your essential expense, then use whatever is left for your purchases and daily expenses. It may seem drastic, but you can always start small and grow your savings gradually. This savings technique will also train you to budget much more wisely as it forces you to work with a much lesser amount than usual.

5. “When will I ever get out of debt?”

Debt is a dangerous thing when it gets out of hand. That is why young professionals should avoid incurring a massive bill as they can be the ultimate financial burden that anyone can bear.

The problem: Most people incapable of settling their debts are in denial of their true financial situation. Debts only become problematic when you don’t face them head-on.

The solution: Settling debts ultimately boils down to being accountable for your actions and acting responsibly enough to take care of them. Similar to saving money, settling debts should be easy if you have the will to do so. Cutting down on spending may be difficult, but it is a sacrifice that will be worth it once you have settled your debt.

Budget Tips for Fresh Grads

Money problems are a natural part of every young professional’s life. It helps to take every difficulty as a challenge and a learning experience which will help you grow and ultimately achieve financial literacy.

But aside from being aware of potential money problems, young professionals should also learn how to manage their money properly. Here are some tips on how to save money for a rainy day.

1. Define your financial goals.

Now that you’re earning money regularly, it’s important to set financial goals to help prepare you for handling your different needs. Identify your short and long-term financial needs to form a clear picture of where your earnings should go. Write these goals down to remind yourself that you have something to work towards.

2. Top up your CPF and SRS accounts for a worry-free retirement .

Your Central Provident Fund and the Supplementary Retirement Scheme can both help you save up for your future. While the CPF is mandatory, you can consider making top-ups, or adding more to your contributions to grow your CPF savings. Meanwhile, the SRS is voluntary and can complement your existing CPF. It might seem like a long way to go, but starting your retirement fund early means you don’t have to worry about saving more money when you’re older and have more expenses to think about. Learn more about the CPF and SRS here.

3. Open a savings account.

As a fresh grad or a young professional, you might need a bank account where you can place your hard-earned salary. Check out the different offerings of the local banks -- make sure to check for interest rates, transaction charges and the bank’s requirements to see which will fit you best. Today’s digital banking landscape makes it even easier for us to save; most banks offer an automated savings option so you won’t have to go to the bank to deposit.

4. Look into investments.

Growing your money through investments is also a great way to use your money wisely. But before you invest, make sure to ask a professional first. The investment sector has a lot of jargon and processes that first-time users might not be familiar with, and it would help to have someone to guide you through it.

5. Start an emergency fund.

When life throws you a curveball, whether it’s a medical emergency or retrenchment at work, it’s easier to bounce back when you have a nest egg that can help you out of it. Most financial experts recommend setting aside 3-12 months of your expenses for your emergency fund. This is where keeping track of your spending comes in – knowing how much you spend regularly can help you figure out how much you need to save.

Financial literacy is an important lesson you must learn, whether you’re a fresh grad or an old-timer. But it’s best to have a headstart on good money management skills now to set you up for the rest of your life. Planning your finances wisely today can serve you well tomorrow.

Check out our Career Resources page or download JobStreet’s app available on the App Store and Google Play for more tips to guide you in managing your salary wisely. It also offers expert insights and advice that could help you in navigating your career path.