This goes to the recent college graduates.
First off, congratulations!
I should have posted this article last month… just when so many of you were all smiles knowing that you finally get the chance to break from the shuckles of this thing called school. But, as they always say of late greetings, better late than never.
Like it or not, you will soon come face-to-face with the realities of work, life and money. And of course, love.
Above all, love… which, unfortunately, is not our topic.
Exciting, isn’t it?
When I was your age, the first goal I had in mind was to get a job as quickly as I can. And sure enough, I landled a part-time teaching job.
“Boring,” you say.
Well, I least I got a taste of what it’s like to hit a goal. That’s something which they never taught anyone in school. This mind-over-matter thing surely works for me.
Yep, I was proudly making money simply by showing the young kids all the crap that’s contained inside my young head.
And the kids, they kind of like it. I never had a kid complain of a failing grade. Like their genius teacher, in my eyes, they were all little geniuses, too.
But, I’m not going to teach you here how to hack into the school system and land a part-time teaching job in 3 to 6 months.
And no, I’m not going to teach you how to solve a crime in 3 to 6 months, either. Only a politician can do that.
Rather, I’m going to show you 3 money hacks that you can use to avoid sabotaging your financial success.
Money Hack #1: Learn Basic Arithmetic
Just because you already graduated from college doesn’t automatically mean you know how to keep money in your ATM Account. Let me just remind you of this basic equation:
Income – Expenses = Savings
Your goal is to keep Savings a positive value at all times. Ideally, you should be able to increase your savings gradually over time. It can be done, not through the power of your IQ, but through the magic called self-discipline.
Be mindfull of what’s coming in (salary or income), what’s going out (expenses) and what stays (savings).
This is the basic equation to use whether your salary is 10,000 Pesos per month or 10,000 US Dollar per month.
One of my Facebook Friends posted a question, “How do you budget P 20,000 per month.” I commented, “The same way you budget P 2k per month or P 200k per month.” The point is, if you don’t have the discipline to save while you are still earning P 20,000 per month, it would take a mystery for you do it when your salary is already P 200,000 per month.
( See also: 3 Things You Can Do With Money )
Oh, by the way, just because you’re not a student anymore doesn’t mean you already deserve to get your own car. And just because you are already a Call Center Supervisor doesn’t mean you have to hop into a taxi instead of riding that good old jeepney.
Resist the temptation trying to look rich. Do everything you can to be rich, instead.
Money Hack #2: Avoid Drowing In Bad Debt
One of the biggest mistakes people make that sabotage their financial success is getting into bad debt.
The moment you start piling money into your savings account, credit card company representatives (with tie-up from your bank) will soon be calling you offering their plastic money products. Never fall for this offer unless you know exactly what you are getting into.
( See also: How To Develop Your Own Personal Investment Plan. )
As a starter you need to be aware of the differences of these terms: credit, borrow and debt.
Credit means the right to borrow money. The moment you start to exercise this right, that is when you actually borrow money (you become a borrower) and with it comes the obligation to repay. Until such time that you are able to repay that obligation in full, you are in debt.
By itself credit is neither good nor bad. I’m not totally discouraging you against using it. Having Credit Card handy offers a lot of advantages. It is the wrong use of credit card and getting into bad debt that you should be mindful of.
Here are some quick tips to help you avoid getting into bad debt.
- Live within your means.
- Don’t spend the money, which you still don’t have.
- If you don’t have the cash to pay the full price in a single payment, take your eyes off that expensive toy. Don’t you even dare touch it.
Don’t overstretch yourself too thin financially. It’s good for keeping peace with yourself.
Money Hack #3: Look Into the Future
Do you still remember your first day in college? It seems like it was only just yesterday, right?
Well, time is like that even as you start working already.
After one year at work, it would seem that you have already survived your life’s biggest torture. And then you have family of your own and have kids. Before you know it, you’re already 40 years old!
The most creepy thing to happen when you reach forty is when you discover you still don’t have enough in terms of savings and investments. And then you’d ask yourself, “Where has all that money gone?” Well, it turns out, you can learn from Wonder Woman.
My dear young man / woman, that is not very uncommon. A lot of forty-something adults are in that situation. They may be sporting the latest and the greatest release of iPhone. Some are even driving a shiny new car every 5 years or so. But behind that mask is hiding an aching Savings Account.
Be smart and don’t let it happen to you.
As soon as you start working, put some money aside each month towards your Retirement Fund and don’t be tempted to touch it. At your young age, the most important thing to develop is your habit to save, regardless of the amount. It could be P 10 per month, or P 1,000 per month, or P 10,000… anything you are comfortable with.
You’ll have greater success if you can invest this money in a stock mutual fund. For example, if you start working at the age of 20 and you can set aside P 1,000 per month until you reach 40, your investment would have grown to roughly P 1M! Not everyone in their forties has that money.
I bet at your age, P 1,000 is just nothing. You’re just throwing it out by way of expensive coffee, dinning out with friends, corny movies at the cinema, fashion accessories, etc.
( Saving vs Investing: Which One Brings You Closer to Your Financial Goal? )
Well, that’s none of my business already. 🙂 But, can you imagine how much it would reach if you can set it aside to grow in a investment that compounds 8% to 10% annually? Afterall, it’s money that you’re just throwing out the window. If you’re throwing it out, woudn’t it be nice if you can throw it back at yourself instead?
Parting Words
This is something I wish someone has shown me when I started working. If you are a fresh graduate and you bumped into this article, consider yourself lucky and be smart to consider the 3 money hacks above.
The world is at your fingertips. While it’s important to have fun while you are young, it’s even more important to have funds when you are older. As someone said, “Do something today that your future self will thank you for.
Use your time wisely and use your money wisely, too.
