As you embark on your career journey as a young professional,

The global financial landscape is dynamic and traditional notions of stability are being challenged. By understanding the principles of personal finance and implementing sound financial strategies, you can build a resilient foundation that will protect you against economic turbulence and empower you to thrive amidst challenges.

What are the Dos and Don'ts of Personal Finance?

Dos

1) Set Long-term and short-term financial goals.

Setting sensible short- and long-term financial goals is important for young professionals for various reasons. They include clear financial direction, increased motivation, and focus, promoting effective budgeting and planning, and supporting retirement planning. Setting specific, measurable, achievable, relevant, and time-bound goals helps young professionals prioritize financial discipline and work toward achieving long-term financial stability. Additionally, financial goal setting allows for a balanced approach that considers both immediate needs and future aspirations, ensuring that financial resources are allocated wisely and aligned with young professionals' retirement planning goals.

2)Monitor your expenditure.

Are you financially aware? If not, you need to start tracking your expenditure. Tracking your expenses helps you develop a deeper understanding of where your money is going. It allows you to gain awareness of your spending patterns, identify areas where you may be overspending, and make informed decisions about your financial priorities. Additionally, it helps you save more effectively towards your financial goals.

3)Plan your finances.

Planning your finances as a young professional should be a walk in the park. Assess your needs and responsibilities and plan your income based on that. In other words, budget your finances. Evaluate your sources of income and have a clear outline of your expenses e.g., rent, food, transportation, etc. When it comes to shopping, work with a shopping list. This enables you to stick to your budget. Your emergency funds should also be part of your budget. A trick when it comes to helping you maintain your budget is to plan for miscellaneous.  Miscellaneous expenses are expenses that are not essential for day-to-day living but still contribute to an individual's overall spending. They include entertainment and leisure, travel expenses, self-care, gifts, and celebrations or takeout. When you budget for this, you are more likely to maintain your budget. If you happen to have multiple sources of income, it becomes easier to allocate funds for specific expenses.

4) Have a savings Plan.

Gone are the days when people live by the mantra you only live once when it comes to personal finance. An event that taught us this expensive lesson was the covid 19 pandemic. Many people lost their jobs. It was a rough time for individuals who were yet to comprehend the value of savings. Executing a good savings plan requires financial discipline. This entails cutting down bad financial habits such as impulsive buying, living beyond your means, and debt recycling. Alternatively, you could save with a target in mind. This enables you to strategize and work toward achieving your target. Truth be told, saving can be tough. To minimize the risk, you could consider automating your savings. Set up an automatic transfer from your checking account to a dedicated savings account each month. This will ensure that you save consistently and prevent you from spending the money impulsively.

 5)Set up an Emergency Fund.

The importance of having an emergency fund cannot be overstated. Emergency funds keep you afloat when you have an unexpected financial blow. They can also keep you out of debt as you figure out ways of getting back on your feet. Aim to save a portion of your monthly income. Begin by amassing an emergency fund of three to six months' worth of living expenses. This fund will serve as a safety net in the event of unforeseen circumstances such as job loss or medical issues. Depending on your income, you can also have a monthly plan for emergency funds. In an event whereby you did not use the money, do not squander it, instead save up for future emergencies.

6) Educate yourself.

Personal finance is a lifelong journey. You may not always get it right. The more knowledge you acquire, the better equipped you'll be to make informed financial decisions. Seek professional guidance, read financial blogs, and listen to podcasts by experts on money matters. They often cover significant topics such as budgeting, saving, investing, managing finances and so much more. Read personal development books that touch base on personal finance. A personal favorite would be Rich Dad poor dad by Robert Kiyosaki. With millions of copies sold worldwide, this personal finance book is sure to challenge readers to rethink their approach to money and investment.

7) Prepare for setbacks.

As a young professional, setbacks come in various forms. They include health complications, job loss, unsuccessful job searches, or worse accidents. In case of search complications, many professionals undergo financial strain. The best way to go about it is to anticipate such instances. This does not mean you walk around with a chip on your shoulder; it means having the foresight to plan for rainy days, Consider obtaining insurance coverage to safeguard your interests. Insurance covers such as health insurance, car, and rent/homeowners insurance protect your assets. Even when you are low on cash, you can be able to get assistance from your insurance company.

8) Supplement your income.

Salary is the primary source of income for most individuals which is taxable depending on your income bracket. For many people, the net pay is often not sustainable for bills. It is advisable to diversify your income streams to protect yourself against financial setbacks. You could begin by looking for a side hustle. With the rise of the gig economy, finding online jobs has never been easier.  Several freelance platforms could help you supplement your income. The beauty about it is that freelance work is flexible; your day job doesn't have to be affected. Investments are also an alternative to supplementing your income. A good investment is guaranteed to have returns that go a long way in boosting your income.

 9)Invest.

Contrary to popular opinion, one does not need a lot of money for one to invest. Several investments do not require a lot of starting capital. For a beginner, I would recommend opening a retirement account. Consider having a pension scheme or an individual retirement account with monthly contributions. The trick to investing is adequate and thorough research. Know the ins and outs of what you plan to invest in including the risks, market research, objectives, and standard procedure. It is quite unfortunate that many young professionals have been scammed out of their hard-earned money for failure to conduct their due diligence. Investing as a young professional sets you on a trajectory toward financial freedom.

10)Review your Financial Plan.

Financial plans are not cut in stone. Reviewing your financial plan enables you to evaluate and track the progress of your financial goals. As a young professional, one can assess what is working and what is not and take corrective action to set you on the right track.

The following is an overview of the Don’t’s of Personal Finance.

Don’t:

1)Live beyond your means

Spending more money than you earn to accommodate a specific lifestyle is a bad financial habit that could lead to serious repercussions such as being buried in debt and loss of property through repossession.

2)Neglect your budget

Without a budget, it becomes difficult to track your expenses which could lead to bad financial judgment.

 3)Lack a savings plan

It is easy for one to miss out on opportunities such as investments for lack of capital that one could easily get with savings. One might also face financial difficulties in case of an emergency.

4)Impulse buy

This is a detrimental habit that leads to a strain on the budget creating room for additional bad financial habits such as debt accumulation.

5)Neglect your financial statements

Financial statements are not only useful in determining expenditures but also useful in tracking fraudulent activities. Issues can be detected earlier on and resolved with a keen eye on financial statements.

6)Debt recycle

This is whereby one pays off a debt to incur a new debt shortly after. It can create a cycle of borrowing and repayment, where individuals find themselves continually indebted without making significant progress toward financial stability.

7)Fail to do adequate research

Making financial decisions with instant gratification in mind is a terrible financial habit that has led to the loss of hard-earned money. Do adequate research on a product, project, or asset before investing your savings.

In a world where economic crises and higher rates of inflation are the new norm, the importance of personal finance knowledge and skills cannot be overstated for young professionals. As economic landscapes continue to evolve, it is crucial to adapt and equip oneself with the tools needed to safeguard financial well-being. By embracing financial literacy, and good financial habits,  you can weather the storms of economic uncertainty and position yourself for long-term success. Remember, in the face of economic volatility, knowledge truly is power. So, seize the opportunity to take control of your financial destiny, and let your newfound expertise guide you toward a prosperous future in an ever-changing world.

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