Financial advice for fresh graduates

IT’S that time of the academic year again… graduation time! Many fresh graduates think they will be done learning (it’s just starting) and will begin their career working at a start-up, join the family business, or enrol in the corporate cubicle rat race. 

Congrats! But just before you begin living payslip to payslip, here is some financial advice for all you fresh grads.

First, build your emergency fund. In your first year of full-time employment, save enough to create a three-month financial buffer and grow that into a six-month buffer in your second year of employment. 

This means you can handle unemployment or a financial setback without stressing out or being forced to accept the first job that comes along. 

Only 18% of Malaysians can last for three months, while only 6% can last for six months. 

Start saving and be part of that 6%. Even a RM 1,000 emergency creates difficulties for 75% of Malaysians and that’s one majority you definitely don’t want to be a part of.

One way to pay off debt and build your emergency fund quickly is by extending your university lifestyle well past your graduation.

Don’t expand your dining budget, those cup noodles really aren’t that bad. Move back in or continue to stay at your parent’s house if possible.

I continued to live in my 17 square meter student studio for over two years after graduation. Hopefully, you will grow addicted to how quickly you are saving money!

Understand the concept of lifestyle inflation and resist it. 

Don’t try to compete with where your friends are living, flying to, what they are driving, wearing and eating. It’s the surest way to empty your bank account and it won’t make you happy.

Always consider buying a second-hand car. 

Speaking of kids, spend some of your first salaries on a really nice gift to your parents and show some genuine appreciation for all the love, money and time they have poured into making you a decent human being.

Pay off any debt you may have as quickly as possible. Treat debt as toxic. The only exception would be debt with less than 1% annual interest. 

Although PTPTN falls in this category, I would still recommend paying it off because you don’t want to become blacklisted and be barred from leaving the country. 

Also, the government now offers a 10% or 15% discount if you pay off either 50% of your loan or the full loan.

Get a credit card and start building an excellent credit score by paying off your debt in full, every month. 

Don’t use it as a financing tool. Check your credit score through CTOS regularly and track improvements to your score. 

Hate your job after two weeks? Don’t give up too easily, show perseverance and give it at least six months. 

Practise lifelong learning: your own knowledge and skills are the most important assets you will carry with you throughout your career. 

When you talk you will learn nothing new, when you listen you have the opportunity to learn new things. 

Practise the art of active listening at work (still working on this myself).

As a country can be judged by how it treats its prisoners, people can be judged by how they treat those who are below them on the social-economic ladder. Treat your maid, barista and Grab driver with respect. Acknowledge they are working hard to make ends meet.

Many financial advisors will advise you to make a budget. But I know you won’t actually do that anyway, so forget about it and remember and act according to this gem from Warren Buffet instead: “Spend what is left after saving, instead of saving what is left after spending.” 

Consider saving as spending money on your future self. Surely, your future self is a worthwhile cause?

I will finish my advice slightly contrarian: consider that as a student you had plenty of free time but little money, but the reverse will be much more likely for the rest of your life, at least until retirement. 

Don’t forget to live a little and spend some money on a great adventure between your graduation and your first job.

Mark Reijman is co-founder and managing director of https://www.comparehero.my/dedicated to increasing financial literacy and to help you save time and money by comparing all credit cards, personal loans and broadband plans in Malaysia.