When I first started working, I didn't know much about financial planning. I worked to earn money so that I can travel and buy the things I love.
As you can probably guess, I was really bad at saving and was spending above my means. I only thought about now and not the future. I wished someone was there to guide me when I started. Then maybe I wouldn't have wasted so many years losing out on financial gains.
If you are smart enough, you will follow these 6 financial steps once you step into the corporate world.
1. Buy insurance
The only thing I did right when I first started working was to buy health insurance. I got a term insurance, personal accident insurance, and Integrated Medishield insurance.
My decision paid off when I had to go for surgery two years later. I stayed in a private hospital and didn't have to pay a single cent. It felt so good that I could protect my money.
2. Open a higher interest savings account
Now, if your hard-earned money is going to sit in a bank, you should make sure that you are earning as high an interest as you can get.
Many banks offer bonus interest if you credit your salary into your account, pay bills with it, spend on your credit card, and/or insure or invest with them.
If your bank account can't earn you at least 1.5 to 2% a year, no excuse. It's time to find a new one (even if you have been using your current account for years). That is especially important if you have significant savings.
3. Understand CPF
The Central Provident Fund (CPF) earns you compounding interest, which can snowball your savings. I have written a more detailed post on 5 things you should do with your CPF when you start working.
By knowing how to optimise your CPF early, compounding interest will work its magic and you will get more for your future housing, education, medical needs, investment, and retirement!
4. Save for your emergency fund
If I could advise my younger self, I would have told her to pay off her University tuition fees quickly and save at least six to 12 months of salary before splurging on food, buying branded things, and travelling to expensive cities.
This will come in handy during rainy days or when you want to take a break between jobs.
Here's why you need an emergency fund and how to get started.
5. Learn to invest
If you want money to work for you, you cannot escape from investing. Just by working for someone, you will find it very hard to reach financial freedom.
If you don't know where to start, read our investing columns, go for seminars, or pick up a good book.
6. Maintain a good credit score
A good credit score can help you get loans and ensure that you have no problems getting a new job in future.
First, you have start your credit history by applying for a credit card. Having the right credit cards can provide you with great benefits and rewards but be careful not to misuse or mismanage them.
Here are 5 practical ways to improve your credit score, which includes paying your credit card bills on time.
This article is first published on BankBazaar.sg.