To be honest, I didn’t even spare a thought for financial planning throughout college. My mom shouldered the tuition fee, the rent and utility bills, and my allowance, so what did I have to save money for?
A few months into my first job, however, I realized just how horrible I was at handling money. Sure, I got to buy myself all sorts of nice things, but that’s it. My bank account was not growing and my funds were not even close to the down payment of that property I’ve always dreamed of owning.
Fortunately, I was able to get my act together with these tips about dividing earnings wisely. As a young professional, you can learn from them, too.
Keep an Emergency Fund
No matter how small you think your salary is (and this is the case for many yuppies), you need to have an emergency fund. Investopedia says it will keep you away from financial trouble and help you sleep better at night. Eventually, you would be able to save up more than enough money for vacation, your own home, or even retirement.
Personally, I make sure a third of my salary goes to the bank. It limits my daily expenses greatly, but I also enjoy the fruits of my labor during the occasional travel.
Get Your Financial Priorities Straight
Do you really have to buy those fancy sneakers? Does your wardrobe really need that designer bag? Before you even think about spending on luxury, straighten out your financial priorities. These include basic necessities such as food and (sensible) clothing, transportation allowance, and any debt you are currently paying off.
Set aside 50% of your income for the necessities — and be strict about it. This way, you wouldn’t have to worry about not having enough money to pay the bills and, yes, your groceries. Whatever you have left after taking aside the essentials and your emergency fund, you can spend it for yourself.
If you still have money to spare, share part of your earnings with your parents. Only after working did I start realizing that while spending money is as easy as writing checks and swiping credit cards, earning it is back-breaking work. Your parents worked so hard to give you a good life and now that you can, it’s time to give back.
Young professionals have a long way to go before they have the means to live an expensive lifestyle. With that said, learn to live below your means for now — focus on sustaining your financial priorities and emergency fund. Be frugal and patient; in time, you will have the money to live more than comfortably and, if we share the same goal, to invest in real estate or personal property.
Legit. Thanks for the tips, Karol!