Once graduates have acquired their degree and secured permanent employment, it is important for this group of individuals to hone their attention on becoming financially independent. In light of July being National Savings Month, young professionals who were privileged enough to have parents, caregivers or sponsors to provide financial support throughout their schooling careers need to learn how to stand on their own feet once they are earning their own income.
This is according to Motshabi Nomvethe, Technical Marketing Specialist at PPS, who states that reaching financial independence is a milestone in the life of any young and ambitious professional. “It is a great feeling of satisfaction for any millennial the moment they realise that they are financially able to live comfortably off of their monthly salary. However, reaching a point of total financial independence is not an easy task for most young professionals. It takes small but impactful changes to one’s spending habits in order to learn how to spend their available funds wisely on a monthly basis.”
Nomvethe provides the following tips for young professionals to adapt their spending habits this month on their journey to financial independence.
Evaluate and eliminate unnecessary expenditures
The first thing young professionals should do is allocate a few hours every month toward creating a budget in an effort to evaluate what exactly they are spending money on. Fixed expenses such as rent, insurance, student and car loans are priority expenses and young professionals need to ensure that they can first pay these expenses before spending money on unnecessary items such as clothing and gadgets.
A budget allows an individual to evaluate and identify areas to cut down on unnecessary spending. The cost of buying lunch, coffee or going out frequently can accumulate quite quickly without even realising it. By calculating exactly how much money goes into frivolous items, young professionals will be less tempted to buy takeaways, cappuccinos and expensive meals and rather start saving larger amounts of money.
Become a diligent saver
Once a proper budget has been created, it will be easy to determine exactly how much money can now be transferred into a savings account every month. It is advisable to set up a monthly debit order to avoid the temptation of spending the money rather than saving it.
Start saving for retirement
Although saving for retirement might not be the main focus of millennials, they need to realise that the sooner they start saving, the more money will be available for retirement spending due to the years of accumulated compound interest earned on these savings.
Given that people are living longer, starting to save earlier for retirement will not only help individuals to provide for themselves during retirement, but also take the pressure off of young adults who may have to look after their elder parents, while also trying to provide for their own family.
Be careful of credit
While it is important to build up a positive credit profile from a young age, many people find themselves in a position of being over-indebted due to bad spending habits and purchasing items that they cannot afford. As most students have hefty student loans that they need to repay once they start working it is advisable that young professionals avoid opening accounts with numerous retailers and getting themselves into unnecessary debt.
When a person has a credit card they can be easily tempted to buy expensive goods, while forgetting that credit providers charge steep interest rates on these amounts. Young professionals need to be careful of how they acquire credit and always be sure that they can afford the monthly repayments on their credit so that they can maintain a good credit score.
Splurge every now and then
Young professionals should also put aside a portion of their income to splurge every now and then, provided that their financial responsibilities have been taken care of. It is reasonable to occasionally indulge in a splurge meal or to go out for fun activities with friends. As long as this spending is regarded as a treat and not a habit, these professionals can also spend a percentage of their salary to enjoy their younger years.
“Financial independence is something that will take time, discipline and willpower but when a young professional realises that they are able to support themselves financially without help from a third party, they will have a great sense of self achievement. By keeping the above tips in mind, young professional can aim to achieve financial independence soon after earning their first salary,” concludes Nomvethe.