To be young and carefree, they say. But nothing comes close to understanding financial literacy at an earlier age because it helps develop healthy lifelong financial habits. Making smart money moves when you are a young professional will benefit you significantly as you navigate through financial freedom and wealth creation.
Ester Ochse, Product Head at FNB Integrated Advice, says, “The reality is that a lot of young people tend to easily give in to instant gratification and living in the now when it comes to managing their monthly salaries and finances. This derails them from making sound financial decisions as they continue to grow in their careers. As we commemorate Youth Month, we urge our young professionals to have solid financial goals – be it for the short or long-term. It is important that they take a few steps when it comes to making any simple or complex financial planning decisions.”
Ochse shares six smart money moves that young professionals can consider when managing their finances:
- First smart money move: Budget and allocate your finances correctly. Prioritise your accommodation, monthly groceries, transport, data costs, saving, investing, and having the right insurance. Don’t prioritise eating out and partying all the time.
- Second smart money move: As much as the first thing that you want to do is buy a fancy car, don’t jump into buying it as a young professional. Rather try to build up a small nest egg while you build a credit score and cultivate the discipline of managing your money effectively. If you really do need to buy a car, rather be conservative about how much you can afford and remember to include all the other costs, such as insurance, fuel, and maintenance.
- Third smart money move: It is important to decipher between needs and wants, or necessary and unnecessary credit.
- Fourth smart money move: Build a good credit score. Make sure you take a credit limit that you need and can afford. This also comes with being responsible and disciplined, as it will help with a better rate on a home loan and vehicle finance. Also avoid missing any debit orders, as this will impact your credit score and long term wealth creation.
- Fifth smart money move: Start with building on your emergency fund – work towards 1 but ideally 3 months’ worth of income. This will buffer you from unforeseen expenses in future.
- Sixth smart money move: Start putting away a little bit towards your long-term goals, be it buying a home, furthering studies or even retirement. With time on your side, you can truly leverage compound interest and the compounding effect.
“The money decisions we make when we are young set the tone for how we will manage our finances in future. As a young professional, be very intentional about the small or big financial decisions you make as they are crucial in helping you succeed in pursuing the best opportunities that life has to offer,” Ochse concludes.
