The first salary from your first permanent full-time job hits your account. It’s a great feeling, isn’t it? For many, transitioning from student life to professional life is a major turning point: instead of living on a tight budget, you start receiving a regular income! To help you make the most of your hard-earned pay, we’ve gathered professional tips for financial management.
Treating yourself is allowed and earned after working hard. Whether it’s a multi-course dinner, a new gadget, or a vacation, you’ve truly earned it. However, keep in mind that this is only the first of many salaries, and plan your spending accordingly.
"One of the most useful tips is to keep in mind the student days lived on a small budget," says Ylva Yngveson, a personal banking advisor. "Most of us learn to budget and stretch every penny as students; don't throw those lessons away just because you have a bit more money available."
Avoid Common Financial Pitfalls
The temptation to sign various installment agreements and buy everything from new smartphones to streaming services can be high, but it is rarely financially wise.
- Commitment Traps: Monthly subscription-based contracts can be difficult to get out of. Suddenly, you realize they weren't such good deals in the long run.
- Flexibility: High fixed costs can limit your life, especially if your plans change quickly.
- Tip: Audit your direct debits regularly. Check how much you spend on music, movies, books, and even coffee subscriptions, and cancel the ones you don't use!
Thinking Long-Term
Early in your career, your financial situation might be the best it will be for a while. If you plan to start a family later, you may have less disposable income until your children are grown. "Your financial situation may never be better than during your first five working years, so you should save while you still can," Yngveson notes.
Save a Little Every Month
While life situations vary, the goal should be to put at least a small portion directly into savings every month.
- The 10% Rule: A good rule of thumb is to save 10% of your salary.
- Purpose-Driven Savings: Some savings should be for specific goals (vacations, a home), while others serve as an emergency buffer (for when your phone or washing machine breaks).
- Where to put it? Use a standard savings account for buffers. For long-term goals, consider mutual funds (rahastot). Stocks are an option for those who know the market, but funds are often safer for those who follow it less closely.
Moving Up and Buying a Home
- Increasing Income: Today’s job market is dynamic. Often, the easiest way to get a significant raise is by changing jobs, as it allows you to negotiate from a clean slate.
- Buying a Home: Be aware of risks. Even if interest rates have been low, they can rise. Consider if you could still afford your mortgage if rates went up or if you had to move when the housing market is down.
Ylva’s 5 Tips for Managing Your Finances
- Create a budget and stick to it!
- Think carefully before committing to long-term contracts.
- Build a buffer for unexpected expenses.
- Ensure your insurance is in order – protect your property, health, and income!
- Aim to save at least 10% of your salary.