As a young adult starting out university or college, what do you need to know about money and personal finance? The original version of this article was published by TonyRobbins.com, helping you discover how to achieve massive success and long-lasting fulfillment. Ultimately, an extraordinary life = life on your terms.
Congratulations, you have finished high school!
You are now ready to begin your tertiary education at college or university setting course your path for your bright future!
But, before you strike out on your own, there are a few things you should know about money that could make the difference between financial success and becoming a NEET living with your parents in your old age.
Create a Spending Plan
First things first, you need to create a budget. No matter where you go or what you do in life, this is a basic skill you need to learn now. Think of your budget as a spending plan – it’s not meant to be a killjoy, it’s a map that will help guide you to your financial goals.
If you’ve never created a spending plan before, enlist the help of a financially responsible adult or a personal finances advisor. If your parents are going to help you financially while you’re in school, sit down and do this with them.
Start by determining the income that will be available to you. This includes parental allowances, scholarships/grants/education loans, and any part-time income.
Next, assess your expenses: education fees, food, petrol, rental if you’re living away from home, etc. This may be an eye-opener – you may want to see what scholarships are still available or start applying for a part-time job. Deduct your expenses from your income. Save and invest the difference (re: invest now below).
Be Smart About Loans
If you’re like most of your secondary school friends, you are going to be enrolled in college or university the next year. For many Malaysians, you (or your parents) will take out an education loan to make it happen. However, before you rely heavily on loans consider that unpaid student loans in Malaysia is equal to RM39 billion which is equal to 1MDB debts! Having unpaid education loans can cause you to have a bad credit score and even travel restrictions.
If at all possible, avoid costly loans that you’ll be paying back for the next few decades in your life. If you do take out a loan, borrow the bare minimum you need to cover the cost of your education fees. Using your education loan as a cash fund for your enjoyment will leave you trapped in debt in the future.
Learn about loan repayment options now, before you take a loan. It may seem overwhelming, but you should know what your plan is to pay your loans off before you take on debt. Remember that if you opt for extended payments, your payments will be lower, but the longer you continue to make payments, the more interest you’ll end up paying. If at all possible, start paying down your loans while you’re still in college. This will minimize the interest you end up paying, meaning you’ll be able to pay them off faster.
Build Great Credit
Now is the time to start building your credit report, because before long you will want to apply for a credit card, buy a car, or even your first property. The first thing that your lender will want to know is your credit score. You can find out what your credit report is for free via eCCRIS.
To have a good credit report, you need to pay any bills and loan payments on time and in full. Having a credit card which you pay off fully every month can help you build your credit score provided you can handle them responsibly. Opt for a credit card card with a low credit limit. Make small purchases only and pay on time and in full. Treat credit card purchases as you would cash making sure you set aside immediately the amount you need to pay. Or else, just stick to cash and debit cards for now.
Avoid credit card debt at all costs; it will cripple your financial goals. Also avoid applying for too many loans or credit cards at the same time.
Start Saving and Investing
Save what you can, even if it’s just RM100 a month. If you receive any unexpected cash gifts or make money working before you start uni/college life, take 10% and spend it on whatever you want. And then save the rest for your upcoming university/college expenses. Life will become expensive fast, especially as your loan repayments start, and you’ll be glad you put money aside.
Start investing for your future now. The best time to start investing is yesterday. The second best time is today. Retirement may seem a distant far off goal but the power of compounding returns is on your side if you start earlier. You can start with simple investment options like Fixed Deposits, PRS (take advantage of the youth incentive!), or other low-risk secure investment.
If you’re up for a challenge and have a passion for investing, you can also start building an investment portfolio with ETFs, Unit Trusts or shares starting from small amounts.
- Compounding Interest Calculator
- Fixed Deposits (FD)
- Private Retirement Schemes (PRS)
- Unit Trusts (UT)
- Exchange Traded Funds (ETF)
What challenges or advice would you like to share with young adults today?
"I challenge you to make your life a masterpiece. I challenge you to join the ranks of those people who live what they teach, who walk their talk."
Team Tony cultivates, curates and shares Tony Robbins’ stories and core principles, to help others achieve an extraordinary life.