5 Money Lessons Fresh Grads Need To Know

Picture this: You graduated from college.

Soon, you will get a nice certificate, a nicer student loan to go with it and, hopefully, the nicest new employee orientation package you have ever seen.

Sounds great. But there is just one small problem.

Suddenly, people are calling you an adult! Whoa.. Wait what?

Source: Know Your Meme

It’s almost like Thanos putting on his infinity gauntlet, snapping his fingers and just like that you became an adult. Except in this case, it’s real life, you’re putting your work clothes on and thinking of snapping the your go-to stall’s signature dish up for lunch.

Most People Are Doing Money Wrong

Remember when you were a kid, you were confused, and you questioned everything? It always seemed to me that these grown-ups had answers to everything.

When I was a kid, I thought that grown-ups knew it all. For instance, whenever we needed money to buy something, there was this machine that the grown-ups would always go to and it was like magic.

They insert a card, press some numbers, and voila – money always comes out without fail. I later learnt that this wonderful device was known as an ATM.

Fast forward to today, and those grown-ups? They’re the same. Everyone’s figuring things out as they move along in life.

The other thing that makes adulting hard? There’s a lot of poor money advice out there.

As you enter the real world, you will hear money advice from your friends, colleagues, family and the auntie that talks too much. However, most of them have no idea what they’re doing either.

And before you know it, you’ll be digesting terrible advice and getting into sticky situations like buying a big property as soon as possible or investing into the property market and ending up asset rich but cash poor.

The biggest problem and the truth? A lot of money advice and practices are “inherited”. There is a strong tendency that we may tend to end up following in our parent’s money habits. These are all a big no no.

Let’s move on to some truths.

1) Think Twice Before Buying A Car Early

After experiencing public transport for a while, you may feel the need or urge to buy a car. I’m pretty sure most people would know the prices of cars here.

Most people would be very happy to have their dream car, if it can be done.

Source: Motor1.com

But do you know the true cost of car ownership in Singapore? It’s more than just the car and the COE.

https://blog.seedly.sg/factors-cost-car-price-singapore/

https://www.singsaver.com.sg/blog/car-maintenance-cost-in-singapore

It would be prudent to plan for getting a car later when you have more disposable income.

2) Yes, You Are Gonna Pay A Lot Of Taxes

You gotta pay money after you earn money. Does it sound a little strange? Well, that’s income tax for you!

It’s a good idea to have a basic understanding of how our tax system works, like the tax rates for certain income brackets and so on.

You may be interested to know that you can do good for society and lower your tax payments at the same time. How? Through donations of course!

Here are a few handy guides and online resources on Taxes:

https://blog.seedly.sg/guide-income-tax-singapore/

https://blog.seedly.sg/list-of-charities-causes-donate-iras-tax-relief-voted-seedly-community-singapore/

https://blog.moneysmart.sg/budgeting/personal-income-tax-singapore/

3) What Is Credit (score), And How Will It Save Me Thousands Of Dollars?

The first thing that may come to mind is a credit card. Or, for the business and accounting students, it may be debit/credit.

In college, your academic abilities or your athletic prowess were important. But in the real world, its all about your credit. You see, your credit score is how financial institutions like banks and credit card companies decide whether you are good for the money or not.

Your personal credit score decides the interest rates you pay. On a big-ticket item like a mortgage, a slight variation in interest rates can mean paying the difference of thousands of extra dollars over the lifetime of a loan!

Well, how does the credit score work? What matters most at this point would be paying your bills on time and how long you have been paying those bills on time. If you haven’t been building your credit, you need to get a credit card.

Source: Loyalty Lobby

Please use it responsibly and pay off the entire balance every month without fail. The interest rates on credit cards are deadly and accumulated credit card interest means you will never get ahead financially.

You can get a free copy of your credit score when you apply for a new credit credit card, or you can pay a small fee to retrieve your credit report.

You may like to do some further reading below:

https://www.creditbureau.com.sg/credit-score.html

https://blog.seedly.sg/singapore-credit-bureau-report-credit-score/

https://www.dbs.com.sg/personal/articles/nav/budget-spend/debt-series-understanding-credit-scores

4) You Don’t Have To Budget

But you do need to track your spending if you want to save some serious money down the line.

In my opinion, having a basic idea of how much money is going in and how much is going out is the most important step to building wealth.

I don’t go crazy or all out on the planning and budgeting, you may feel a little lazy to allocate money here and there.

You can also use free apps and tools like the Seedly app or a spending tracker to automate things.

I've linked them down below:

https://play.google.com/store/apps/details?id=sg.seedly.pa&hl=en_SG&gl=US

https://apps.apple.com/sg/app/seedly-personal-finance-app/id1128637461

5) The best time to start investing is yesterday. The second-best time to start investing is today

Compound interest is the steroid you need to give your money to grow. It’s even better if you start young.

And nowadays, everyone seems to be throwing the word “investing” around. But how do you do it yourself?

You don’t have to be a genius to do it because the critical aspects of no-frills investing are

• Don’t try to trade

• Save as much money as you can

• Put your money into a low cost and broadly diversified index fund

That’s all you need to get you going! Investing can be that easy.

This is a pretty comprehensive sharing by a Seedly community member, Frankie, on well-diversified passive stock investing via ETFs

https://seedly.sg/questions/what-is-your-general-investing-philosophy-strategy

This is another opinion by Yun Heng, a fellow Seedly community member, on how he picks ETFs

https://seedly.sg/opinions/how-to-pick-the-right-etfs-for-your-long-term-portfolio

Putting it all together

Well, that is a lot of words to digest. And adulting may still be as daunting as before.

But the most important takeaway is to stick to a few simple adulting rules and soon, you will find yourself a responsible grown-up who isn’t so lost after all.

Stick to them and you will eventually see something even better – a lack of money related stress and then beyond that, total freedom.