5 Healthy Financial Habits for Young Professionals

Entering the workforce is the most important step in gaining financial independence. Find out which habits are useful to develop as early as possible so you can always remain in control of your finances.

ValueChampion Editorial Team

by ValueChampion Editorial Team on Jul 12, 2024

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Just like diet and exercise, we all have different financial habits. As you begin your career it is important to develop good financial discipline. These practices can help you save and earn money throughout your life.

Related: Lessons On How Wealthy People Spend Their Money

Develop a Personal Budget

budgeting saving loans
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It is important to know how much you can afford to spend on each of your expenses. Creating a budget based on your income and expenses allows you to set weekly, monthly and annual spending and saving goals.

The “50-30-20 Rule” is a common budgeting method with broad guidelines. The rule states that 50% of your post-tax income should be used for essential spending categories. Essential expenses include groceries, housing, utilities and transportation. The next 30% of your income should be used for discretionary spending such as entertainment, vacations or new clothes. Finally, the 50-30-20 rule advises that 20% of your income should be used for savings and debt repayments.

It is important to note that the 50-30-20 rule should be used as a guideline to help you start your own budget, but that your own expenses may not fit neatly within these categories. Feel free to create categories that make sense for your typical expenses. Finally, make sure that your budget includes every expense so that you don’t have any unpleasant surprises at the end of the month.

Pay off Debt

personal loan debt
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If you’ve accumulated student loans or other types of debt, it is important to begin paying off this debt. Compounding interest works the same way for your debt as it does for your investments. This means that over time, your loan balances will continue to grow and there is urgency to repay your loans. If you have a lot of debt, it is prudent to make a plan to make regular repayments with a total repayment date in mind. This will keep you organised and motivated as you pay down your debt.

Compare Best Personal Loans in SingaporeFind Out More

Open a Savings Account and Contribute Regularly

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Opening a savings account allows you to track and segment your savings. It is important to regularly save money, even if your contributions start small. This helps you build an emergency fund for unexpected expenses, or save for a large future purchase. It also helps you get in the habit of spending less than you earn and saving money throughout your career.

Related: How to Plan Your Finances for Short, Medium and Long Term Goals

Start Investing Early

It’s also important to start investing early in your career. This habit can yield great returns over a long period of time due to the power of compounding interest. Compounding interest is the concept that describes the interest earned on interest. As an illustrative example, an individual that starts investing 10 years earlier than another person may earn more than twice as much during their career, assuming that the individuals invest the same amount and receive the same annual return rates.

compound interest over time

There are many different ways to begin investing. These range from brokerage accounts, which offer traditional investments, such as stocks, bonds or ETFs, to crowdfunding investing platforms, which offer investment opportunities in local SMEs.

Here are a few online brokerage firms you can get started with.

Moomoo

moomoo by FUTU is a great brokerage for investors who are looking for a platform that allows them to get the most bang for their buck.


Moomoo


Pros

  • Lowest commission fees in Singapore
  • Lifetime $0 commission for US stocks
  • No minimum income requirement

Cons

  • Commission free trades only apply to US stocks, does not apply to SG or HK stocks
  • High margin rates
More Details
If you prefer a mostly hands-off approach to investing, you might want to check out robo-advisors, which rely on bots to automate your investments. Here are a few options to explore.

Best Investing Tools in SingaporeFind Out More

Use a Credit Card, But Avoid Credit Card Debt

opening wallet to show credit cards inside
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Taking advantage of credit card rewards programmes can save the average consumer hundreds of dollars annually. In addition to these savings, using a credit card helps individuals build their personal credit histories and credit scores.

Credit cards typically charge interest rates of about 25% based on the unpaid balance each month. Therefore, credit cards should be used for expenses that can be paid back quickly to avoid quickly accumulating debt. Most credit cards allow you to make automatic payments each month to avoid accumulating debt. These can be helpful, but it is crucial that you have money in your account to cover your entire credit card bill.

Compare Best Credit Cards in SingaporeFind Out More

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