Singaporean college graduates, you are about to enter the happiest time of your lives. Master these money lessons to keep the good times going.
When you are a teenager, you look forward to being able to buy what you want and doing whatever you like. When you are past the age of 40, you will miss the time when you didn’t have a mortgage and other major adult responsibilities.
At some point in between, you are supposed to be happy. That point is when you just graduate.
Here are the important truths you need to know about money, to keep it a happy time:
1. Discounts Are For “Those Who Know”
Discounts are not a surefire way to save money. We raise this because fresh graduates have a limited income and are easily attracted to such offers.
For the most part, discounts work for people who are experts in the given category.
Wine discounts work best for people who know wine, discounted stocks work best for people who’ve made a career out of identifying them, and supermarket discounts work for shoppers who have three children to raise and know Sheng Siong prices by heart. In short, discounts are for Those Who Know.
Otherwise, a discount mostly ends up in you buying substandard products or things that you don’t need. Just wait till you buy a discount travel package, and end up stuck in a broken-down bus for seven hours, or in a resort where the toilet facility is a shovel.
Remember this even when your grow older, and are faced with discount air tickets, discount cars, and discount property.
2. Don’t Compare Another Person’s Tenth Year with Your First
There are property agents and financial advisors who make S$150,000 to S$250,000 a year, sometimes more. There are bloggers who make S$5,000 for every blog post they write. There are travel writers who can explore the world and never work in an office, and still make S$12,000 on a bad month.
Don’t be under the impression can quickly make the same amount. Do not compare your day one to their day 3,650. Many of those people have sacrificed years of their lives to their jobs, in order to earn the amounts they make.You almost certainly don’t have the knowledge and experience to generate the same results they do.Yet.
If you make S$1,500 a month but are in a profession where the top earners seem to make 10 times that, don’t quit on the spot. It’s not that you’re being treated unfairly, or that you have no aptitude. It takes time for the results to show. Be patient.
3. Find Your Own Strengths Before Copying Your Role Models
Tiger Woods can make a million dollars playing golf, but he may not be able to do it by trading stocks. Warren Buffet can make a billion trading stocks, but he may not be able to do it by cooking. Gordon Ramsay can do it by cooking, but not by…you get the idea.
The point is, what makes one person rich may not work for another.
Your talents can make money in a way few others can emulate. So identify what your strengths are before fawning over other people’s strengths. Instead of trying to trade stocks like Buffet by reading 20 books about him, spend some time identifying which of your own aptitudes are money-makers.
Write a book and try to sell it. Design a t-shirt and try to sell it. Go find out what you’re so good at, people will happily give you money for it. That’s more useful than if you spent a year learning all about Rich Person X.
Now this doesn’t mean you can’t learn anything at all from rich people. Learn from their virtues and pick up their basic business strategies. But don’t obsess over following their exact road to wealth; it may work for them but not for you.
4. Making Money is Not About Being Materialistic
We see this attitude in a lot of new graduates; a sort of disdain for the money-minded.
Now we know you can live without a big house or a jet. We know you think it’s uncool to be materialistic and shallow, and we congratulate you on it. We think that too. But focusing on money isn’t about having expensive bags or a BMW. Here’s what it’s about:
If you can’t make enough money to support yourself, you are a burden on your family and friends.
That’s why we do things like compare credit cards in Singapore or nitpick over which bank accounts to use.
We don’t enjoy reading bank brochures or staring at spreadsheets any more than you do. But once you internalise what we said in the above paragraph, handling financial realities will become a lot more tolerable.
5. You Make Money By Fulfilling a Need, Not Having Qualifications
If someone will pay you a lot of money to fix their problem, but it is not something you studied for, consider doing it anyway.
If you are a qualified architect but can’t find a job, and someone will pay you S$3,000 a month to help restock their minimart, then the appropriate response is to ask “Which shelf do I start on?”
Get the money first, then you can afford the luxury of looking for a more appropriate job.
This is always better than sitting around moping for months, with zero income, on the basis that the jobs around you “don’t meet your qualifications.” Before you ask, yes, this can mean flipping burgers at a fast food restaurant, or being a shoe salesman. There’s no shame in it. Your friends, older siblings, and parents have all probably had to do similar jobs at some point.
6. Pay Your Credit Card Bills in Full
You cannot afford any loan that compounds at 24 per cent per annum. Pay your credit card bills in full. If you absolutely can’t (and how are you spending so much?) then get a cheap personal loan, and use that to pay off the credit card.
A personal loan is only around six to nine per cent per annum. You have much better odds of paying that off.
If you have massive debt or defaults before you buy a flat, you will regret it. Having uncontrolled debt will affect your relationships, spread the stress to your family, and prevent you from finding new sources of income (you can’t invest or start a business if more than half your income is swallowed by loan repayments).
Practice financial discipline early, so it becomes a habit that sticks.
7. Don’t Tie Your Self-Worth to Your Income
Fresh graduates are a favourite target of ponzi schemes, multi-level marketers, and other dubious elements. They will prey on your fears, and your sense of inadequacy.
Those people are jerks. Most of them are making you question your self-worth, so that you can be suckered into buying whatever nonsensical vision they want to sell you. Their ethics alone should make you question working with them.
Before you agree to whatever they sell, always work out what it costs you. Even if there are no upfront costs, work out how much your time is worth per hour, and how many hours you’ll waste on them. As a rule of thumb, you can afford to experiment if it costs less than five per cent of your current wealth.
If you have $5,000 in the bank, you can afford to experiment up to a value of S$250, in terms of time wasted or actual cash invested. Anything more is a loss you shouldn’t tolerate. You’re just starting out, and every dollar counts.
8. Save 20 Per Cent of Your Monthly Income (On Top Of Your CPF)
Keep doing this until you have accumulated up to six months of your income. Then, and only then, can you stop and start using the money for various investments, holidays, etc.
This is to ensure that, when financial disaster strikes, you don’t need to turn to loans. The idea is to stay as debt free as possible, so you have no issues with your first major loan (likely to be your home loan.) And again, staying debt free means more opportunities, as your cash isn’t swallowed to pay off interest.
9. Try to Grow Your Income By 5 Per Cent Each Year
Try various ways and means, be it by scrubbing floors or helping to design websites. This may even mean moving to another company, or negotiating a raise.
If you make S$2,500 a month this year, try to make S$2,625 next year. An extra $125 a month is not unachievable. When you do make that amount, aim for S$2,756 a month the year after, and so on. Of course, you won’t always succeed – but the point is to keep trying.
Notice that we keep the amounts low and achievable. Earning in hundreds is a real possibility, as it keeps you focused on realistic goals and services that people will immediately pay for. A little money in your bank now is always better than a lot of money in your imagination.
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By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.