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Being a young professional entering the work place for the first time and being exposed to the luxury of earning a salary is great but does come with its challenges like the responsibility of financial affairs. Many young professionals are not well equipped or have the necessary know-how and insight into managing their money the right ways to ensure financial security over the long term.
The lack of know-how in regards to the principles of saving leads young professionals to a variety of hasty and uninformed decisions that can be financially damaging to them according to debt counsellor Wikus Olivier at DebtSafe.
“When many young professionals first enter the workplace, their main concern is usually just surviving or succeeding at their job, often resulting in personal financial affairs being less of a priority. However, it is crucial that young professionals educate themselves on how to create a solid financial foundation to avoid future repercussions – especially considering that this new period in life also comes with new expenses,” says Olivier.
Managing personal finances correctly stem from many reasons like choosing to start saving aggressively early in order to afford large expenses later on or the obligations to pay of existing debt. What ever the reason to save there will always be some rough patches along the way.
Here are some tips for young professionals from Wikus Olivier that will help ensure a promising financial future:
Pay Yourself First
By setting an automatic debit from your current account to your savings as soon as you get paid is an important first step that will help manage your finances and savings no matter the amount. You will also earn compound interest on the amount you saved.
Save In Portions
It is ideal to save a portion of what you earn. It might be difficult to put aside a portion of what you earn at level entry salaries because they are minimal but with correct budgeting it becomes useful. Overspending can be done easily due to eating out or entertaining, which can leave nothing left for expenses and saving. This is when you should allocate reasonable amounts to recreational activities done in a month and stick to it.
Medical Aid And Insurance Is Important
Many young professionals want to enjoy their new financial freedom to its fullest and because they are young, healthy and in their prime they think the need for medical aid and insurance falls away. However the reality is that unfortunate things can happen in an instance. Car accidents and falling ill are possible scenarios and the costs to repair and get proper treatment can be high. It is better to research and take out, even if it is just basic, medical cover and affordable insurance to allow yourself the best care and support in any likely scenario.
Resist Credit Card Temptation
Credit cards do have benefits that lure you in, especially if you have a tight budget, but they should not be applied for lightly and without thinking. It may be exciting to qualify for one but it is the most common way young professionals fall into financial distress because they lose control over payments and exhaust the credit facilities. This has negative consequences like a bad personal credit record, which will limit your access to credit and loan grants in the future. If you already have credit card debt you should create a credit-specific payment plan for yourself that will accommodate all the payments needed for your credit card. It will help mitigate any risk of having to skip these important payments.
A great way to save and grow money at the same time is by investing smartly. You just need to research and identify suitable investments that allow you to build on, nurture and grow with each month. It can be rewarding and lead to financial benefits in years to follow it. These benefits include perks like compound interest and share dividends. Always make sure you are well informed and advised when you choose where to put your money. This is very important.
Start Young To Retire Comfortably
Saving for retirement should start at a young age because the younger you start the smaller the amount you will need to take away from your annual salary as time goes on. It is the most opportune moment to start as the majority of young professionals in the market do not have any dependents yet. When you start a family and settle down it will become difficult to allocate funds towards your own future.
“While it may be difficult at first to get a grip on your new financially free life, being responsible and taking the future into account when dealing with your finances can significantly reduce stress, allowing you to focus on other areas in your life. The bottom line is that planning ahead can assist young professionals in leading a potentially financially free future – a concept which can certainly not be underestimated,” concludes Olivier.