Money Management Tips for Young Professionals

Did you just land a job after years of study, internships, and hard work? Congratulations! The thrill of a first job is second to none. New environment, meeting new people, and most importantly financial independence – there is lots to celebrate.

But with financial independence comes a lot of responsibilities such as taxes, paying for rent and utilities, etc. We understand that this can be a little overwhelming initially and have therefore put together an easy guide to help you manage your finances while you begin your professional journey.

Saving vs Splurging

Spending your own hard earned money can be satisfying but unless you’re careful, your bank balance will have an unhappy tale to tell. Here are a few tips to help you strike a balance between the two.

  • Distinguish Between Wants and Needs

There are things that you need to buy and things that you want to buy. Differentiating the two right from the beginning is important. Things that you need include essentials such as food, utilities (household bills for example), and so on while wants could include a brand new watch or a new gaming console. While we understand the importance of indulging every once in a while, it should not negatively impact your finances.

  • Decide Your Financial Goals

Figuring out your financial goals for both short and long term is essential. Do you plan to buy a car in the next two years or a house in the next 10? Are you planning to invest in some stocks or an emergency fund?

Decide your goals based on what works best for you as everyone’s financial situation is different.

  • Budget and Track

Once the first two steps are done, plan your budget around it. Certain experts have suggested a 50-20-30 ratio where 50% of your salary can be spent on necessities, 20% towards savings and investments, and 30% towards other expenses including outing, travel, and food. However, this is a general guideline and can be tailored to suit your needs. 

Additionally, tracking your finances is also important. Sometimes our spending can spiral out of control leading to financial issues at the end of the month. Using a money management app such as the Money View Money Manager App can be beneficial.

  • Start an Emergency Fund

Life is unpredictable and you never know what can affect your financial status. Saving an amount that is equal to at least 6 months of your salary is recommended. Additionally, ensure that you have access to this fund as and when you need it. 

  • Debts and Credit Score

Having a good credit score is beneficial in more ways than one and building it takes time. The earlier you start working on this, the easier it will be in the long run.

Start off by repaying your debts (if any) on time. This is a crucial step as delaying or missing your EMIs can be detrimental to your credit score. If you do not have a credit history, you can avail a loan such as personal loans or other loans and repay the same on time to build a good credit score.

The Bottom Line

Money thrives where money grows. Starting early is always an advantage as you have more time to understand financial management and you can also take risks. Before spending all your hard earned money on impulsive purchases, consider making a plan based on your requirements and goals. Doing so will also ensure that when you do spend money on indulgent purchases, you can do so with peace of mind. 

What tips from this blog are you planning to use? Do you have other guidelines in mind? Let us know in the comments below.