(This article was originally published on the 29th August 2017 and updated on the 12th of January 2022).
If you are a young graduate who just got employed, receiving your first salary can be really exciting. Since this is your first time getting paid for your hard work, surely, you will have a few things in mind that you would like to spend on.
But, do you know that many have regretted overspending their salary due to bad financial planning? In this article, let us share with you some tips on how you can plan to better spend your first pay cheque.
1. Plan Your Expenditures
As soon as you receive your first salary, plan your expenditures carefully. First, check and pay off all your bills and loans before spending on anything else. Make sure you prioritise your ‘needs’ before your ‘wants’.
2. Start a Savings Account
Turn saving into a habit. Try to allocate at least 10% of your salary to be used for your savings. You can start by opening up a separate savings account. This will avoid you from using the money that you saved for your daily expenses.
Look for a savings account that offers you with high interest. The more you save, the more interest that you would accumulate. Also, in the event of any future unforeseen emergencies, you can use your savings to fund it.
3. Purchase Insurance for Protection
You should not ignore the importance of having insurance. It acts as your financial shield to cover you against any accidents and unfortunate events.
There are many types of insurance in the market such as life, health, education, and general insurance. Look for an insurance package that suits your needs and budget from the many insurance companies in the market.
4. Plan for Retirement
It is never too early to plan for retirement. You can start by investing in a retirement fund. A great example of an institution providing financial management for your retirement is the Employee’s Provident Fund (EPF) or the Private Retirement Scheme (PRS). Try to avoid withdrawing from your fund for any reason like buying a house or renovating it. You would not want your fund to run dry before you retire.
5. Purchase a Low Cost House
Is it really impossible for a young graduate who has just started working to own a home? Of course not! With some planning, you definitely can. With just a few months into your job, you can still own a house even with a salary below RM3k.
But, if you think the monthly repayment is too high, you can always rent out your house or room. With the monthly rental you receive, you can afford the home monthly repayment and also get some side income for yourself.
6. Spend Moderately on Yourself
When you receive your first salary, you will surely want to celebrate and spend it on yourself. It is not wrong to do so, but try to spend moderately. Try not to be influenced by the latest trends and fashion. You do not need branded goods, gadgets or smartphones that are well over your budget.
You do not want to overspend and leave nothing for your savings. Try to spend within your means and alternatively you may opt for cheaper goods. There are many ways to celebrate without blowing your budget.
We hope that you find these tips useful. Remember, one can never predict their future circumstances, so it is very wise to be prepared with savings and insurance, even by doing it little by little.
This article is prepared by Direct Lending, an online personal lending platform with the mission to provide simple, safe and affordable financing to all hardworking adults. We help borrowers to find, apply and receive financing that most suit them. Our service is 100% free, no upfront payments, no processing fees.