Thursday 5 April 2018

The 3 not so wise decisions Graduates make with money

  Posted at  April 05, 2018 No comments
So, CONGRATULATIONS! You finally graduated! The world is now before your feet and you can accomplish anything! You deserve a celebration!

Hold on a minute... before we get too excited, the fact is that most Singaporeans are not from rich backgrounds. Majority of us graduate without a job, and sit on a study loan of around $30,000 (This is a debt!). And yet, we are going to... SPEND SPEND SPEND when we haven't seen a single cent come into our bank accounts. Many of us (I myself included) have been guilty of at least one of these.

Graduation Trips
How can anyone resist going to places like these? 

On the number 1 item is graduation trips! How can anyone NOT go on a graduation trip, seriously? Everyone who is graduating seems to be travelling somewhere these days. See the Northern Lights, visit Eiffel Tower, road trip around Europe, and the list goes on.

"Eh, But Hor, you think la. You only can travel now leh, is the best time you know? When you start work liao you think you got time to travel meh?"

Many Singaporean graduates will think exactly like this and go on extremely "long trips". One or 2 weeks trips are fine, but many are looking beyond 1-2 months trips now. Some even take a loan from their parents to go on graduation trips.

If you come from a rich family, you could be excused for it. However, if you are not loaded, your parent might frown at you because they expect you to start work and lighten the family load. The last thing they would expect from you is to stretch out your hand asking for money! But remember guys, we are still sitting on a $30k debt and it just got to maybe $35k or even $40k, just with the graduation trip.

Sure, go have fun, after all it might be a once in a lifetime experience. But keep in mind, the longer and further you go, the more additional debt you do not need increases.

Expected Damage: 
Recommendation: Spend within your means if you have to go. Save up by doing part time work during the 3-4 years of your study life to minimise the damage incurred. Don't empty your bank especially if you have not landed a job!

Graduating without a job
It takes time and effort. It is not my fault, or is it?
Sure, its not your fault. Who would want to graduate without having a job? However, if you did graduate without a job and still proceeded to go on a graduation trip, do close your eyes and observe a minute of silence for your poor wallet.

Ready? Now let me give you the truth. And it hurts. You were really naive for not making sure you graduated with a job.

The current Singapore market is not doing too well. Many industries prefer candidates who have experience over fresh graduates. Coupled with a slightly sluggish economy, it is no wonder many graduates cannot even land a job within half a year of graduation. This is unless of course you are a top student who is sought after. Don't be hoodwinked by mainstream news like Straits Times telling you "9 in 10 graduates (88.9%) who graduated in 2017 are able to find jobs within six months of their final examinations with those from local universities earning a median of $3,400."

If by reading mainstream news, you EXPECT to land a job automatically and EXPECT to earn somewhere around $3,400, you couldn't have been more wrong in taking things for granted.

An article by Dollar and Sense reveals that in fact many struggle to land a job and earn far less than what the news media are telling us beyond the numbers.

The longer you wait to find a job, the longer your study loan debt will stare you in the face and the more stressful it gets when you eventually wonder if you will land a job at all. Many don't panic until the water is boiling.

Expected Damage: 
Recommendation: The best time to start job searching is in fact 6-8 months before you graduate. This is because if you start late, you most likely have zero interview experience under your belt and will likely screw it up. The earlier you start, it gives you a buffer time and chance to access the job market for opportunities and prepare well. It even gives you an advantage over your peers - those who wait. The early bird catches the worm. Heck, you could even go on the graduation trip in peace of mind knowing you guaranteed a spot at a company. Don't wait till it is too late.

Entertainment/Lifestyle gadgets - Credit Card
I love Jay Chou. Who doesn't? Maybe your wallet. Lol.
So, perhaps you have gone on a graduation trip, and even landed a job. Well done! You should really reward yourself with a concert. Or get that new Iphone X or Samsung S9. You deserve it!

The truth is that we are really victims of our generation of success. We have grown up with this society telling us we should instantly satisfy our wants. In the past, our parents generation were mostly poor and they understood the sweetness of delayed gratification. Not so much for us. We want it and we want it now.

Expensive clothes, branded stuff, expensive restaurants or dining about even more expensive holidays. Can't afford them? For everything there is the Credit Card. (Beware of the trap of the credit card)

I have met quite a few young Singaporeans some of whom are friends "living it up" for a variety of reasons. Some just want to look trendy, and not lose face among their friends while many spend more beyond what they can earn. Some got into really bad habits like gambling while keeping up the lifestyle facade. This kind of spending is not sustainable, especially when you have a debt on hand. By using a card each time you make a purchase, it also becomes hard to keep track of all your spending. You might be tempted to just keep swiping/tapping the card.

Expected Damage: 
Recommendation: This is where many graduates struggle even after they landed a job. Because our income suddenly increased when we did not have it previously, we have upgraded our lifestyles by spending more. A good rule of thumb would be to decide a portion of your salary to save per month FIRST before spending and not saving only after you have spent most of your salary. And, pay off all your debts first while keeping track of your expenses. This is especially crucial in the starting stage of your career.

I, too was a 月光族 (Every month finished spending salary) for a good 2-3 years of my life. In retrospect, if I had the chance to do it again, I would tell my younger self to plan properly. Our education system has taught us many things but the one thing they did not teach us was how to manage our money.

Do a good job. You will thank yourself in the future.

Until next time,


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Related topics:
1. About K.C. What is my story?
2. My 3Cs to money/investing
3. Why you need to set aside money for savings first

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