How to manage your finances as a graduate

1. Learn to budget: A budget is telling your money where to go. Think of it as your spending plan. A budget is simple; it is what you earn (your income) less what you spend (your expenses).

If you learn to budget from your first pay cheque and to live within your means, you have won more than half the battle.

Learn to build good financial habits from the beginning because bad habits are harder to break in the long run.

2. Learn to pay yourself first: The quickest way to grow your savings and investments is by paying yourself first.

Paying yourself first means that you do not spend all your income but you put aside a percentage towards savings and investments.

So, whenever you are paid, you would transfer a portion into a savings account or an investment. To make sure you don’t just rely on willpower, you can automate your savings by creating a debit order.

3. Build a credit score – learn how to use credit wisely: There is no reason to fear using credit. Your credit score is simply a reflection of your past behaviour with credit; it shows you and potential lenders how creditworthy you are – do you pay on time or do you miss payments? With this information, the lender can then decide if they will extend the credit to you or not, and at what interest rate.

To maintain a good credit score, always pay your bills on time – before or by the due dates. Don’t miss one month and try to compensate by paying double the following month – your credit score depends on consistency of repayments.

4. On purchasing your first car/property: There is so much pressure for young adults to show up as successful! Drive the expensive car, rent or buy the posh apartment with high-end furniture, dress like a million bucks, eat at fancy restaurants.

But this is a tall ask for people who haven’t really even begun adulthood. And many fall into the debt trap trying to please friends and family.

As a graduate, any big purchase you make, whether a car or property, will probably be very costly only because you do not have a long history with credit. To compensate for that, the banks will most likely charge you a higher interest rate.

That is why it is best to not make big purchases for at least the first two or even three years of starting your first job. Instead, you should save your money and build your deposit.

A lot of young people have no perspective of time. If you do things right, you will buy the nice car and house in due course, and you will truly enjoy your money; just pace yourself.

5. Debt is a trap: Do not fall for taking on commitments such as credit card accounts, personal loans and store accounts to fund your lifestyle.

Debt is a slippery slope that can quickly spiral out of control, leaving you stressed and anxious all the time.

If you do find yourself in debt, take drastic steps to get out of it. If you can move back home, do so.

A year of sacrifice can make all the difference in the world.

6. Build an emergency fund: You will probably encounter an emergency that will require money. To keep things simple, aim to have at least R10 000 worth of funds just for emergencies. This money should not be in your normal account where you do all your transactions.

Most banks offer a sort of savings pocket without the extra fee.

No matter what you heard while growing up, your credit card account is NOT your emergency fund.

7. Learn to save for what you desire: In a world where, it seems, instant gratification prevails, be the rebel; learn to save for the things you desire. This will save you thousands of rands and will put you in a better financial position compared with your counterparts in the future.

If you want something, be disciplined enough to wait, save for it and only buy it when you can afford it.

8. Learn to invest: Learn that there is a difference between saving and investing.

Saving is short term; it is money you put away so you can spend it in a couple of months.

Investing, on the other hand, is putting money away to earn compound interest in the long term; this is anything from five years.

In your twenties, you have the greatest asset working for you: time. Time in the market can yield the best financial rewards. Just commit to putting away money every month, even from R500, in a low-cost investment like a tax-free savings account, an exchange-traded fund or a unit trust, with an asset manager.

9. Protect your biggest asset – you: If your employer does not offer risk benefits, be diligent and obtain disability, dread disease and income protection cover. Life can throw curveballs at you; having these benefits will ensure that your financial life is not thrown into a whirlwind when the challenges of life come your way. It’s a small premium to pay for peace of mind.