After 20 odd years of education, you are finally making your first step towards financial freedom. For the past 20+ years of your life, you didn’t have to worry about how you would manage your expenses. The most you would think about is how to save up for the PlayStation game you want to buy, or save up for that dream dress.
But when you receive your first pay, it finally dawns on you. Your years of education would have equipped you with many useful skills. However, one particular skill appears to be missing: The skill to manage your finances.
Thus, to help fresh graduates better manage their finances, we handpicked four areas you should spend your first pay on. This article will not be an ultimate guide to the whole universe of managing your finances, but it will give you a good start.
1. Spend it on your tuition fee loan
While you were still in your polytechnic/university days, these three words hardly pop up in anyone’s mind. After all, it is an interest-free loan that is sponsored by the Singapore government to encourage you to pursue higher education. But upon your graduation, the reality sets in. Your bank will start to impose interest rate charges on your tuition fee loan, starting one month after your official graduation.
While you have the option to take up to 20 years to repay your loan, you wouldn’t want to do that. This is because the longer you take to repay your loan, the more interest payments you would accumulate. You will find yourself paying unnecessary interest charges in the long run. Thus, one area we would advise you to spend your first pay is on your tuition fee loan.
Related: Average Cost of Tuition in Singapore
2. “Buy” a regular savings plan
If you were to talk to your parents and ask them for their biggest regret when they were young, lack of savings will probably be it. As a fresh graduate, you might not see the importance of saving from young. You will only start to regret when you are older and no longer have time on your side. Thus, in order to not live in regret, why not start saving from your first pay and make it a habit?
One way you can save regularly and also allow your savings to grow is to sign up for a regular savings plan. As the name suggests, a regular savings plan is a plan where you put in a constant amount on a monthly basis. But instead of putting it into the bank as cash, regular savings plan buys exchange-traded funds (ETFs) or stocks for you. You will find yourself sitting on a pot of gold when you are old. At that time, you will look back and be proud of the decision you made.
Related: Which Regular Savings Plan Is the Cheapest?
3. Buy some protection for yourself (and your family)
The reason why graduates don’t buy insurance for protection is similar to why graduates don’t start saving from young. When you are young, you have this immunity mindset. You believe that you are still young and healthy. Thus, you do not need any insurance. Why buy insurance when you won’t need it anyway?
Yet, this is precisely the purpose of insurance, i.e. you buy insurance to protect yourself against that small chance of an accident. It is a small fee to pay for the amount of tangible and intangible benefits it could bring to you and your family.
Also, did you know that it is much easier to buy insurance when you are young? Insurance companies believe that you have a lower possibility of health implications. As such, companies do not require you to undergo any health checks prior to buying a policy. Oh, and did we mention that it is also cheaper?
Read also: 7 Reasons Why Millennials Need Insurance
4. Spend it on enhancing your skills and knowledge
As a fresh graduate, your mind is still in a good state for absorbing skills and knowledge. You find that you are absorbing everything you see, hear and do, like a sponge. You need to leverage on this highly curious stage in your life to enhance your skills and knowledge. This will prepare and equip you for future challenges in your career.
You need to spend a small portion of your pay to improve yourself. This can be subscribing to learning sites like Lynda, or signing up for Skillsfuture courses, or buying books to read. In this era where change is constant, you will find this very useful.
Read also: 4 Things to Invest in While You Are in Your Mid-20s