By the end of March or early April, we will be welcoming once again the fresh college graduates of batch 2018. The timeline from college graduation to (hopefully) your first job will be short and before you know it, you will be facing the realities of #adulting. After graduating at 20 or so years old, some will embrace adulthood and independence by taking that first job, earning their own pay and actually living on it sans their parents’ allowance, or living on their own and paying their own bills. While the others who wait will struggle to adjust at paying their own bills at 30. Earlier is always better so it’s really okay to just bite the bullet and start adulting your finances this early.
On the bright side, a majority of Filipino college graduates will start their financial lives in the green without the crippling million peso student loan that US college graduates are so burdened with. Accessibility to a college education in the US comes at a million peso price tag. That’s not the case here in the Philippines. Conversely, we do not have any access to student loan financing, whether from private banks or government financial institutions. Fortunately, most Filipino parents pay for their kids’ tuition, sometimes all the way to law or medical school.
You are essentially starting with a clean slate. Let’s assume you are starting with assets worth PhP0.00 / USD0.00 and zero liabilities.
Know the what
Okay, finances is a big word but what does it entail really? Your finances include your assets, liability, net worth, income, profit and/or losses. As a college grad with zero assets and zero liabilities your financial life will commence by obtaining income usually by getting a job.
For obvious reasons a business is not viable at this point as there is zero assets. I always found it amusing how some college grads started a not-so-small business straight out of college with capital obviously obtained from parents.
Know the how
In order to start generating an income you need to first start looking for persons* willing to pay you to do what you learned in college or really any lawful service that you are capable of doing. In order to get a job who says you need to wait until you actually graduate? Start sending out your job applications as early as three to five months from graduation as the job application process takes time. Your actual start date at your employer may start after graduation! You get to decide your start date. The potential downside to applying this early is you lose edge in negotiating your pay as you’re still a tinsy little student and the employer is essentially taking some small risk in hiring you.
Should you fail to graduate on time,** you could always switch your job to part-time.
This will be your first reaction when you get your first paycheck. It will always be the most money you ever saw, no matter how big or small a paycheck it is! I opted to take that first paycheck and spend most of it on lunch for my family. This is in accordance with that time-honored Filipino tradition of pampa-swerte, which calls one to blow 100% of your first paycheck for luck. I didn’t spend 100% of my paycheck but merely most of it. I don’t feel any less lucky.
First things first
Learn how to budget. I don’t subscribe to blowing all your salary, not even the first one. Upon receiving your first kinsenas (half-month) salary, I suggest you put pen to paper and allocate your money as follows:
This is your starter budget. You may always revise and adjust as you get better acquainted with your fixed and variable expenses and the saving rate at which you feel a good quality of life. I’m all for frugality but not at the expense of safety and health, emotional or otherwise. I would never espouse a spartan lifestyle which I myself do not live by.
Take it to the bank!
Now that you first set aside an amount for savings, go ahead and deposit it. Not back to your payroll ATM account, but only and I cannot emphasize this enough, only to a passbook bank account. An ATM account just makes your money too accessible for spending, whether by cash withdrawal, online purchases (as ATMs now are also debit cards) or swiping at stores. If you wish to leave some money in your ATM, make it a minimal amount. Don’t subject yourself to temptation.
Now that your savings are safely out of sight and out of mind, figure out a way to automate your payment of utility*** bills to make sure you avoid paying penalties.
Know the where
You pay your bills on time and save money every month, what else is there to do?
Just more of the same really, until you make your first million. It is very much within your reach! Once you establish a healthy emergency fund, you can start investing in your first capital instrument whether shares of stock, of mutual funds, or government or corporate bonds. For the risk averse, I suggest the very safe and consistent government bonds or treasury bills and certificates of time deposit.
Before jumping in, I highly recommend learning about these investment vehicles.
What was adulting after college like for you?
*Under the law, persons may be individual or juridical (corporations created by law).
**Well, sh*t happens.
***Credit card bills are obviously out, unless you don’t wish to become financially independent of your parents by 30.