Most young people these days choose to live independently as soon as they finish school, some even without having found a job yet! That’s a pretty drastic change because most have spent their lives without any income, fully depending on their parents.
One key aspect that is important for those living independently is financial management. Here are some financial management tips to consider when living on your own:
1. Make a List of Important Bills
It can be challenging to prioritise which bills to pay first, especially if you are on a tight budget. While it is important to make all the monthly payments on time, it may not be possible without proper financial management.
Make a priority list of all the bills you have to pay each month. Be sure to list your financial commitments in the order of the highest priority, such as utilities and rent to the least priority such as telecommunication bills and make sure to always note down how much you have to pay.
Below are some of the typical monthly expenses that you will need to manage:
- Housing
- Utilities
- Groceries
- Transportation
- Insurance (student loans, credit card payments, etc.)
- Debt (student loans, credit card payments, etc.)
- Medical expenses
To avoid excessive debt, remember to keep track of your bills, especially if you live alone. Make a note of the due date of each bill.
2. Set Up an Emergency Fund
Emergencies and unexpected expenses can happen when you least expect them. For this reason, an emergency fund is essential to keep your finances in order. The sole purpose of an emergency fund is to help maintain unexpected expenses such as house repairs, job loss, or illness.
We may not always be prepared for life’s unexpected challenges, especially emotionally, but we can certainly be better prepared financially. There is nothing wrong with saving some extra money for emergencies because that way you will be well-prepared in case you need money right away.
3. Allocate Some Personal Savings
It is much easier to spend all of our income that we have worked hard for each month without worrying about the future. The problem is that we often do not put enough savings aside. Personal saving means putting aside money for a big purchase in the future, such as a car, a vacation, or even for a dream house. Even if you have EPF savings, it is always advisable to save at least 20% of your income.
4. Draw Up a Monthly Personal Budget
Only after you have money set aside to pay bills, personal savings, and emergencies can you determine how to spend the rest of your income. Set up a monthly budget to cover recurring expenses:
- Food during workdays
- Grocery shopping
- Transportation costs (if you use public transportation)
- Fuel cost (if you drive)
- Shopping and daily necessities
Spend wisely, especially if you live in the city where the cost of living is high.
5. Purchase an Insurance Policy
Without an insurance policy, you must assume full responsibility for the safety of your assets and, therefore, the financial risks associated with potential losses, such as a robbery. The right insurance package is crucial to protect yourself and your future. Therefore, choose an insurance package that complements the health and medical, life, accident aspects in order to protect yourself.
6. Investing for Long Term Gain
If you have lots of savings, you should look for reliable forms of investment. When you set aside a fixed amount each month, the power of compound interest and returns will ensure a rewarding financial future. The most important thing is to make an informed investment decision. So do your research thoroughly and start investing early.
7. Avoid Taking Up Too Many loans
The golden rule is: if you do not need the money, do not take a loan! However, if you need a loan for a business or an important matter such as higher education, you should manage your finances in order to repay them in the future.
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