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Congratulations on graduating!
As you stand at the cusp of a new life stage, you will soon be at the helm of the ship, directing your financial journey. As a fresh graduate, it’s likely the case that you are trying to build your own wealth from scratch. Not to worry – money management can and should be simple.
People often regret not saving or investing earlier, and the good news is that if you are reading this in your early 20s, you have the privilege of time – the only thing left to do is to start. So, here are 4 money management tips that will cost you little to none.
Tip 1: Pay off credit card balances and avoid debt
As a newbie to the world of credit cards, it's easy to get swept up by the novelty and lose track of your spending, feeling as though you can afford more than you actually do.
Not paying your credit card bills fully and in time is a recipe for snowballing debt. Interest charges on outstanding balances can add up significantly in a short amount of time – some of the most common credit cards have interest rates exceeding 30% per annum.
Hence, use credit cards only for what you can afford to pay off in 30 days or less. If you’ve already racked up balances, stop using the cards and channel your income into paying them off, starting with the highest-interest debts first. Cut down on non-essential spending, set up automatic payments, or negotiate for a lower interest rate.
For those who applied for student loans from the government’s Student Finance Office, late repayments will incur additional charges and interest.
If you fail to repay, legal action may be taken to recover the amount you owe, along with any other applicable fees. It is important to note that this could have a negative impact on your credit history. To ensure timely repayments, you have the option to set up autopay.
Tip 2: Track your expenses
Before you look at building wealth as a fresh graduate, you need to first know exactly where your money is going, or it will be like trying to fill a bucket with holes.
Expense tracking apps are great not only for setting monthly budgets and recording your everyday expenses, but also allow you to compare your spending across different categories, such as food, transport and entertainment.
A clear overview of your spending patterns gives you a better starting point to adjust your spending, set saving goals, and create a realistic budget you can stick to.
For instance, you realise that your daily coffee runs are taking up a disproportionately large portion of your budget. Yet, it is part of a self-care routine that you are unwilling to give up. What you can do is to look elsewhere to reduce expenses, for example, transportation and committing to fewer taxi rides.
Small changes like this can help you prioritise what is most important to you, and amount to significant savings over time.
Read more: Our top 5 saving tips
Tip 3: Set financial goals for yourself, not others
Whatever your financial goals are, it’s important to take a step back to introspect if these goals are truly what you want, or that of people around you.
We often face pressures from people around us. Get a house by 30, become a millionaire by 40, retire by 50, and the list goes on. Just because many people chase these dreams doesn’t mean that you should too.
Too many people can’t follow through their goals because these goals were not theirs to begin with. Your financial goals should be meaningful to you, because that’s what will make you stick around long enough to achieve these goals.
Be realistic and specific with how you want to achieve them – break down big goals into smaller, achievable milestones, starting from what you can afford now and adapting over time.
Read more: How to prioritise your financial goals
Tip 4: Invest right
Once you have paid off your debts, built an emergency fund and made your financial goals, you should be ready to start investing.
Thanks to the power of compounding, consistent additions to your investment pot – however small – can grow to a substantial amount over time. The earlier you start investing, the more time your money has to grow. Like we mentioned earlier, being fresh out of school and investing early gives you a headstart that your future self will thank you for, here’s why:
While the internet has democratised access to financial information, keep in mind that advice from other online users should be taken with a pinch of salt. Investing is extremely personal – what works best for you is based on your own risk tolerance, time horizon, financial circumstances and goals. Be discerning when consuming such content.
Key investing principles to know as a beginner
Build financial literacy and invest right by learning from industry experts who have experienced the worst and best of the markets.
We have also compiled seven charts about markets and investing that are based on decades of data, which will be helpful for every beginner investor.
Investing – not trading – generally takes on a longer term view that is goal-focused, emphasising on time in the market rather than timing the market. Here’s how it’s done:
- Bucket your goals based on priority and time horizon, such as for housing, children, retirement respectively, and allocate your investments accordingly.
- Spread risks by diversifying your portfolio across asset classes, sectors and geographies
- Invest regularly and stay invested regardless of short-term market fluctuations
At Endowus, we offer a range of advised portfolios that are tailored based on your risk tolerance and time horizon. Our CashUp Portfolios are low-risk and highly liquid, ideal for savings you intend to use in the near-term. For mid to long-term goals, our Flagship Portfolios invest in a mix of global equities and bonds to build your wealth.
Managing your finances is a journey, not a destination.
While the excitement for your newfound financial independence kicks in, you should start putting your assets, including time, to work. It's perfectly normal for your financial goals to evolve over time, but keep your plan simple so you don’t get overwhelmed.
A financial journey is one that is filled with learnings and mistakes (that should not be too costly). Remain curious, adapt as you go, and the journey will be just as rewarding as the end itself.
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Risk Warnings
Investment involves risk. Past performance is not an indicator nor a guarantee of future performance or returns. Projected performance or returns is not guaranteed to materialise. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund.
Risk related to discretionary management . As Flagship Portfolios are provided under discretionary services, Endowus will manage the assets under the portfolio subject to compliance with the terms and conditions of the DPM Services Agreement and on a fully discretionary basis; you will not have any role or right to make investment decisions, except for making contributions or withdrawals from the portfolio; it would not be mandatory for Endowus to provide the underlying fund prospectuses or other fund information to you for each and every investment decision made on behalf of you. You should exercise caution before investing in discretionary managed portfolios.
Flagship Portfolio may contain professional-investors only fund(s) and/or “Complex Product”. In general, Professional-investors only funds are funds that have not been authorised, nor have the offering documents been reviewed by the SFC. “Complex Products” (as defined by the Securities and Futures Commission, the “SFC”) refer to investment products (e.g. funds) whose terms, features and risks are not reasonably likely to be understood by retail investors because of their complex structures. Professional-investor only funds and Complex Product in general may have higher risk than other retail and non-complex products. Past performance is not indicative of future performance. All investments involve risks (including the possibility of loss of the capital invested) and the price of fund units may go up as well as down. This fund may invest in financial derivatives which may involve additional risks (e.g. market, counterparty, liquidity, leverage and volatility risks) and lead to higher volatility. In adverse situations, the fund may suffer significant losses. This fund is not principal protected. In the worst-case scenario, you may lose the entire invested amount. Do not invest in a complex product unless you understand and are willing to assume the risks associated with it, including (in some cases) the risk that you may lose more than the invested amount. Please refer to the “Important Information About Funds” for details of the risks involved. If you are in any doubt, you should clarify with us or seek independent professional advice.
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Opinions
Whilst Endowus HK Limited (“Endowus”) has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or typographical errors. Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Endowus HK Limited (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus HK Limited, its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.
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