6 Personal Finance Tips For Fresh Grads

Some people may have inadequate expertise or understanding in personal finance due to their background. In this day and age, having a solid personal financial foundation is essential for living a balanced and secure life. Your grasp of budgeting, saving, debt, and investing may heavily affect different aspects of your life and can make all the difference between living comfortably or otherwise.

As a young adult who recently entered the workforce, what steps can you take to stay financially healthy?

Here are six personal finance tips that fresh graduates can benefit from:

1. Create a realistic budget that you can stick to

There are plenty of reasons why you need to stick to a budget. For one, it helps you achieve your financial goals. Let's say you want to purchase an RM3000 laptop in 6 months' time. To help you accomplish this financial goal, you'll need to allocate RM500 from your monthly budget. Without a solid plan, there's no guarantee that you'll be able to afford the item.

Another reason why having a realistic budget is important is because it helps you prepare for emergencies and ensures you don't spend on things you don't need. By tracking your expenses, you'll know exactly how much you spend on different categories and how you can better manage your finances.

Keep in mind that it needs to be realistic. If your budget is overly restrictive or ambitious, it may discourage you from sticking with it.

2. Kickstart your retirement plan

With starting your retirement plan, many people think they have plenty of time and opt to take their first step later in life. However, beginning your retirement savings later means you'll have less time and won't be able to take much risk to grow the fund.

According to RinggitPlus Malaysian Financial Literacy Survey 2022, 85% of Malaysians do not have sufficient retirement savings. Not having sufficient retirement savings poses several risks, like falling into poverty or not being able to retire.

It's best to be consistent with your savings - no matter its purpose. If you have extra cash in a given month, you could always contribute voluntarily to your EPF or consider applying for a Private Retirement Scheme for additional cushion.

3. Begin your investment journey

As we grow older and our commitments increase, we learn that time may be the most valuable asset to bettering or multiplying wealth. With investing, it is better to start as early as possible because you can afford to be more aggressive with your portfolio at a younger age.

On top of that, you could use compounding interest/profit to your advantage as it is positively correlated with time. Making the decision to invest early could greatly impact your returns. Even if it's just a small monthly contribution, doing it consistently will allow you to reap the benefits of compounding interest/profit on your investment portfolio's overall performance.

4. Try to generate a side hustle

Having more than one stream of income offers plenty of advantages. For one, if anything were to negatively impact your full-time job, you'll have extra security with another. Whether you enjoy baking at home, designing posters on your computer, or streaming your game play online, there is always something you can do to earn money.

Not only that, if you're able to generate a sizable income from your side hustle, there's a possibility that you could achieve financial freedom early and thus, retire early.

At the end of the day, the rewards you'll enjoy tomorrow may be far greater than the sacrifices you make today.

5. Set financial milestones

Setting financial goals is somewhat correlated with the other points mentioned in this article. Having financial milestones is important for keeping you encouraged and motivated to actively improve your financial health. Without milestones to work towards, it's easy to lose sight of your goals, feel discouraged, and not see any progress.

Financial goals could be anything from having X amount in your retirement savings, a net worth of RM X, owning a house by a certain age, having a diversified investment portfolio, living debt-free, or having enough to support an early retirement.

With goals to work towards, you'll get a clearer picture of how you can steadily and strategically plan to achieve your goals.

6. Work on improving or creating a healthy credit score

Although some prefer an “out of sight, out of mind” approach when it comes to their credit score, it's always better to know how you appear to financial institutions.

When applying for financial products like loans/financings or credit cards, your credit score is what will greatly influence the bank's decision to approve or reject your application. Essentially, it's a three-digit report that represents the risk that banks need to bear if they decide to provide you with financing.

The higher your number, the higher the likelihood of you paying back the money lent to you/settling all the due amount arising from giving financing to you. Besides being approved for products like loans/financings and credit cards, having a good credit score increases your chances of getting better interest/profit rates as well. Always pay your bills on time and try to clear any debt that you have. Consider automated payments if you're forgetful!

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An easily manageable bank account can help keep you on top of your money game. Alliance SavePlus Account/-i is an Everyday Digital Account you can sign up for online without paying a visit to the bank. Not only that, you can even earn high savings rate with flexible withdrawals.

To sweeten the deal, by opening an Alliance SavePlus Account/-i, it also allows for easy cashless transactions and access to foreign currencies. So long as you're a Malaysian aged 18 and above, holding a latest MyKad with an existing CASA/-i account in any bank, you can begin your application process online via allianceonline mobile app. Alliance SavePlus Account/-i is protected by PIDM up to RM250,000 for each depositor and SavePlus Account-i is based on Shariah concept of Tawarruq.

Sign up for Alliance SavePlus Account or Alliance SavePlus Account-i today.

Alliance Bank is a Member of PIDM.