Graduation is an important milestone, usually marking the beginning of a new chapter in a person’s life. Aside from gaining more independence, you are also expected to take on more responsibilities because you’re now considered an adult. This means getting a job, relying on your income, moving out to your own place, and paying your own bills.
All these changes require you to be more financially independent and tackle money matters more maturely. The first step to doing this is to examine your financial habits and make changes for the better.
Below are some financial habits that you should let go of after graduation:
1. Spending on wants instead of needs
Before graduating from college, you received money from your parents through a regular allowance. With little to no financial obligations, you could put your money towards wants like new gadgets, clothes, or trips out of town. While occasionally treating yourself is good, this can quickly deplete your finances as a working professional.
The best way to overcome this habit is to adopt a more critical mindset before buying. Every time you’re faced with an impulse to buy, ask yourself first if you really need the item, how often you’ll be using it, and if you can get a cheaper alternative.
2. Going over budget
Have you ever gone through a week where you ran out of money but can’t remember where you spent it? Or struggled to pay for unexpected purchases? This kind of experience often occurs when you spend without having a solid budget.
Budgeting is one of many important financial habits that help you manage your money better. As you start relying on your salary, staying within your budget is essential for your financial health.
You can start building your basic budget after graduation once you receive your first paycheck. Take note of your take-home pay and weigh it against your bills and other necessary and recurring expenses. From there, you can portion out any excess cash to other aspects.
3. Having no financial goals
You may have gotten used to thinking about your money in the short term, like worrying about the week’s expenses while waiting for next week’s allowance. Now that you’re more independent, you need to think about money in the long term.
Financial goals are important to give your money direction for the future. These goals can include various things, such as investments, upgrading your home, or even a big-ticket reward. When creating these goals, keep in mind your priorities and ensure that your goals are SMART—Specific, Measurable, Achievable, Relevant, and Timely.
From there, you can create a plan to work towards these goals. Make sure to document your progress so you can gauge how close you are to achieving them. No matter how tiny, seeing your progress will give you extra motivation to follow through.
4. Accumulating debt
For most college students, the experience with debt would be the occasional small, informal ones with friends or family. While these are fine, relying on debt for purchases is a slippery slope to racking up even larger amounts. This habit can be further exacerbated if you take on unnecessary loans or use a credit card for non-essential purchases.
It is essential to your financial health to avoid accumulating debt. Careful budgeting and planning can save you the trouble of needing to borrow money. For credit cards, start with a low limit and commit to a strict payment schedule to build your confidence.
5. “FOMO” splurging
There are negative factors that affect your spending, like peer pressure and the fear of missing out or “FOMO.” From going along with your friends to expensive restaurants to buying the latest smartphone after seeing posts about it on social media, this pressure can make you splurge frequently and unnecessarily.
Reaching financial independence will require a more prudent mindset. Instead of fixating on what your peers have, it is better to focus on your own financial goals. Additionally, establish better boundaries with the things that may cause FOMO. Things like taking social media breaks and learning how to decline invitations can go a long way in helping you avoid the urge.
6. Foregoing savings
It’s all too easy to live in the moment, especially when you begin to receive more money from your salary. While you can spend on both wants and needs, you may be left with little to no money for your savings. It may be fine for now, but this financial habit can cause you trouble in the long run.
After college graduation, your income should help build up your savings. Having this cache of money enables you to prepare for any future expense—from buying a coveted reward for yourself to shouldering emergency expenses. Best of all, there are a variety of saving plans that allow you to save while having some leeway for other expenses.
Be Financially Smart
One of the best times to make meaningful and lasting changes in your life is right after graduation. Having your own salary and managing your lifestyle gives you the perfect opportunity to start your financial journey on the right foot.
Aside from developing good financial habits, applying for life assurance is also a must for young adults. BPI AIA offers a variety of insurance and investment products that suit your lifestyle.
Learn more and schedule a virtual appointment with a Bancassurance Sales Executive today!