You have sat for the final exams in college and have passed. Your diploma is in hand. You call family and friends, pop the champagne and celebrate for some time but then, reality sinks in. You need to look for a job!!! So enter the unforgiving phase of sending out resumes and going to interviews – also known as seeking for a job.
Contrary to what you had been made to believe in college that jobs are easy to get, you find that there are no jobs which are readily available for the highly educated you.
Eventually, after several days, months or even years of job seeking you graduate into the land of the working. The job may be formal or it could be your own small startup business. All the same, you now have somesteady income which will allow you to pay your bills. You now have some pocket money.
This now welcomes you to the tricky part where your decision on how you manage the money and personal finance shall determine how quickly you will become successful in future. If not managed well the paycheck disappears as soon as it shows up in your bank account. Regardless of how much money you earn, how early you start planning for your future determines how early you become successful. Here are seven tips on how to proceed with your first and subsequent paychecks.
1. Open a Bank Account
Instead of carrying all of your money around in cash or keeping it under the mattress in your home, you can place the funds into a bank account. A bank account account holds your money, pays interest on your savings, and is available for withdrawal when you need the money. It keeps your money safe for you to use in future. It is assumed that the bank account that you opened while you were in college is still active. Maybe it is time to open one if you do not have it. Saving is key to ensure you a solid foundation for your future dreams.
2. Create a Budget – and tackle your debts while you are at it
Prudent budgeting for the take-home-pay, which means the pay after taxes have been deducted, is key to your success. This will help you to make good financial decisions. You may want to include your student loan and other loan bills in your budget. The earlier you pay them the faster you get yourself to financial freedom.
3. Develop a Savings Plan
Join a Savings and Credit Cooperative Organization (SACCO) and start saving with them by sending checks to them every month. Chose one that will allow you to take a loan once you are through with their grace period, which in most cases is six months. Many SACCOs will give you a loan which is at least three times the amount of money that you have saved with them. The loan is repayable within three years.
4. Take out an Insurance Policy to Cover Risk
If your employment package does not include any insurance to risks, you may want to budget for premiums that come with taking out a health, life and/or disability insurance. Such insurance comes in very handy when life gets nasty.
5. Begin Saving for Retirement
Another item that you will want to include in your budget is contributions to a retirement scheme. Fight the thought that you are too young to retire. Put away some little money to take care of your life post-retirement even if you feel you have more than thirty years to retirement.
6. Develop Short-term and Long-Term Development Goals
It is prudent to start formulating short- and long-term development plans. A short-term plan may be getting married or attaining post-graduate diploma within the next five years. A long-term plan may be building or buying your own house within the next ten years. Having such dreams which you seriously want to implement will encourage you to save more and more, and this is a good thing.
7. Do Not Let the Lifestyles of Others Influence your Decisions
Develop some personal principles that will guide you through life – some do’s and don’ts. When I was newly employed, a friend, now deceased, gave me four secrets to success, to take or leave. I took them and now, more than twenty five years later, I have no regrets that I made that decision. Secret number one was to make sure I took a loan immediately after repayment of the previous one – this means I would take a loan, and use the money to develop or implement some projects, once every three years. The aim was ensure that I have maximized on the number of projects I could accomplish before my retirement. The second secret was that the only loan that I should pay directly from my salary was the very first loan. Subsequent loans should be re-payable using the profits that accrued from the investments made with the first loan. Thirdly, he told me that it was criminal to buy an automobile and park it in a rented premise. That a car incurs a lot of expenses and this may hinder me from saving for a house, which was to him a first priority before owning an automobile. Last, but not least, he told me to set aside some money in case my parents needed help but when doing this I should not over-extend myself or derail my plans.
“The difference, financially, between two people who graduated from college at the same time is determined by when each built, or owned, their first house – Mwai Kibaki, Former President of Kenya.
I have always interpreted this quote to mean that ‘how fast you gain economic freedom is dependent on how fast you settled after graduation. And settling in this case means owning a house and probably a home too. I hope that the tips given above shall guide you towards your own economic freedom sooner that later.