Build wealth from nothing? Here’s how, as a fresh graduate

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: Repay your student loans as early as you can

If you have taken up a student loan such as the Tuition Fee Loan (TFL), your repayment period is likely to start, or has already started upon graduation. Interest rates will add up over time, so prioritise servicing your student loans in your first few working years.

If you are servicing multiple loans, prioritise the ones with the highest interest rates. Set up automatic GIRO payments to help you maintain the discipline to put aside a fixed amount every month to service your loan first and avoid overspending.

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 Grab 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 Cash Smart 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.