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Graduation is an exciting time, filled with milestones like throwing your cap, going on a graduation trip, and landing your first "adult" job with a cushy salary of S$4,200 instead of barely surviving on your allowance as a student. But the financial realities can be daunting.

Going into your first year of working, you may begin to realise that the real challenge was not in crossing these milestones at all. It’s the emotional splurges that leads to overspending, the student loans eating away at your disposable income, and even the taxes that seems to keep catching up to your pay.

And while you try to chase your dream lifestyle that you have always wanted when you were younger, your paycheck never seem to be enough.

Being in your #adulting era with the never-ending responsibilities and obligations, from credit card bills, taxes, to even home ownership, here are the top three tips that can help you win in life:

Let’s get one thing straight: not everyone can be an investment banker, earning way beyond their means and enjoying a lifestyle of supercars and luxury goods. But even so, it is still possible for those rarefied wolves of Wall Street to become what they call a Henry: high earner, not rich yet. At the other end of the spectrum, a janitor named Ronald Read was famed for retiring with over US$8 million.

The secret to riches is all about adjusting your lifestyle expectations to match your income level. While we often justify our frivolous spendings with emotional distress from work, ask yourself this: will this purchase put further financial stress on you?

But we are not suggesting that all fresh grads should turn into home-loving recluses and alternate between two ratty T-shirts for the next decade. After all, that can’t possibly do any good to our mental health, can it?

What we are suggesting is to match your lifestyle to your income level. You earn S$4,200 and take-home S$3,360 after CPF? Great, keep your monthly expenses below S$2,688 (80%) and you are good to go. If you are more ambitious in achieving financial freedom, feel free to go ahead and adjust your monthly expenses even lower while keeping in mind not to restrict yourself too much because the present is still worth paying (living) for.

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Perspective is everything. When you receive your first paycheck, it's tempting to spend it all, whether it's on your parents, a celebratory drink with friends, or the latest iPhone. But before you splurge, remember that your budget is limited. If you're not careful, you'll end up overspending and having troubles paying off that credit card statement.

That’s why, it’s important to set a budget. First, allocate your income to those essential big-ticket items like, rental, insurance premiums, loans, and for some, parents’ allowance. If you have relatively high interest debt like unsecured student loans, repay those debts as quickly as possible to avoid compounding interest. This will save you money and give you greater clarity on what’s left to use instead of blindly plonking down cash on that shared holiday villa in Bali.

Another important lesson for budgeting: track your expenses. Whether you choose to jot down expenses the old school way, or use apps to track your daily, weekly, or monthly expenditure, all of which are irrelevant. What is important is that you don’t spend blindly. Keep an eye on what you buy. Some apps allow you to keep your grimy, faded receipts in digital perpetuity, too. And trust me, getting into this habit will enable you to identify your material weaknesses — did I really spend $337 on second-hand iPad that I barely use?! — and scrimp on these areas in the future.

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Once you are in a more comfortable position, and pretty much settled with your loans, start thinking about building a "war chest". In other words: an amount you are comfortable stashing aside every month, for future emergencies or surprise expenses. As a guideline, your war chest should have at least 3-6 months of your average monthly expenses.

While marriage, home ownership, babies, health issues and retirement seem like centuries away, it is important to at least think about the next stages of your life. It may seem convenient to fall back on CPF contributions but be mindful that these funds are not liquid (easy withdrawable) for you to use freely — not now, at least. You can most certainly enjoy your lavish fresh graduate lifestyle, but budgeting will make life easier in the long run. And that compound interest we talked about earlier will start to work in your favour the earlier you start saving and investing. Let’s face it, we are adults now, too.

Research sources:

Salary.sg (2023)