Five financial planning tips for graduates

If you’re a graduate starting out your career, consider the following financial tips:

  1. Banking and budgeting

The transition from student to a full-time employee may require that you review the type of bank account you use to manage your affairs, so do your online research or visit your bank to establish which account type is most suited to your needs. Remember, the ongoing responsible management of your various bank accounts is essential to building a good credit history, so set time aside to get your banking affairs in order. Remember, it’s not how much you earn that matters, it’s how much you invest, which leads us to the next point.

  1. Saving and investing

There is no quick way to get rich. When it comes to creating sustainable wealth, nothing beats time, so start investing today. Get into the habit of using a portion of your paycheque to save for the future, or at least for some future goal. Ideally, automate your savings so that your premiums run off your bank account on a monthly basis – and be sure to review your level of savings as and when your earnings increase.

The phrase ‘paying yourself first’ is another way of saying ‘invest in yourself’, and the best way to do this is to start saving with your first paycheque. One of the most tax-efficient methods of building wealth as an income earner is to invest through an approved retirement fund, such as through your employer’s pension fund, if this option is available to you, or through an individual retirement annuity on a LISP platform.

  1. Emergency cash

Prioritise setting up an emergency fund to provide a financial shield against high-cost, unforeseeable events. Any sizeable, unexpected costs you may be faced with can derail your financial planning and land you in debt. Ideally, target a cash cushion that would be sufficient to cover your living expenses for a period of three months, and keep these funds clearly earmarked for emergency expenditure. The level of your emergency funding should be driven by a combination of factors such as your current living costs, your risk of unemployment, and whether or not you have other income streams, amongst other things.

  1. Debt and credit history

If you have a student loan in place, be sure to understand the terms of your contract so that you don’t miss any repayments, as any late payments can affect your credit score going forward. As a young graduate starting out your career, it may be difficult to avoid incurring debt, so our advice is to do so responsibly, to incur only as much debt as is absolutely needed, and to ensure that your debt repayments are affordable going forward.

  1. Financial and legal documentation

Make a concerted effort to organise your filing system so that all-important financial and legal documentation is centrally collated as you may be surprised at how often you will need these documents.

Financial success starts with good saving habits. Our Financial Experts have been unpacking and providing practical advice on the best ways to preserve YOUR financial freedom. Contact our Financial Advisors to ensure that you are receiving Shariah-Compliant Finance advice.

Anglowealth is an Authorized Financial Service Provider (FSP Number: 46755)

Source: (Moneyweb, 2022)


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