Landing your first job fresh out of school always carries a strong sense of accomplishment. After more than a decade of formal education, you are finally ready to tackle real world problems for actual companies that are going to pay you for the hours you put into working.
Regardless of the organisation you join, your first full-time job is going to be an eye-opening experience. You will gain invaluable industry experience, and get to apply what you have learnt in school into economically productive work. You will learn to solve problems and deliver high quality work from your bosses and colleagues, acquire good working habits and understand your chosen industry better. This will help set you on the path to building a successful career.
While you do this, it's important not to neglect another important aspect of fulfilling your career goals – understanding that what you do in the office alone may not be sufficient. Here are a few other areas that you should also prepare for when you join the workforce.
# 1 Build up your emergency savings
When you receive your first pay, you shouldn't immediately splurge on material products that you've always wanted to own. Instead, you need to first build up your emergency savings. Doing this will give you a better appreciation of your job security, inculcate good budgeting habits and enable you to start saving for your retirement.
Ideally, you should build your emergency savings to be at least six to nine months of your average monthly expenses. For example, if you spend about $2,000 a month, you should aim to set aside at least $12,000 to $18,000 in emergency savings. This savings should be on top of anything else that you may also be saving towards, such as your wedding, an end-of-year holiday or even renovation works on your BTO flat.
Building a pot of emergency savings can be important for your career for two main reasons. Firstly, in the unexpected event that you lose your job, for whatever reasons, having sufficient emergency savings will give you ample runway and allow you to remain calm while seeking another suitable opportunity.
This is in stark contrast to a scenario where you don't have emergency saving and may feel pressured to take the first offer that comes your way or, worse, take on debt to support your family.
Secondly, having sufficient emergency savings can also help you make better family and/or career decisions. For example, you may be considering a new job today that pays less, but offers better long-term prospects or enable you to take up work that's more meaningful or interesting to you. You may also want to take on less time-consuming work for a short stint if you're planning to care for your baby in the initial months or your parents.
Knowing that your short-term financial commitments are covered gives you the confidence to make the best decisions for your career and your family.
# 2 Insure yourself
When you are just starting out, your biggest advantage is your youth and health. They translate into approximately 40 years of gainful employment and a large sum of potential income.
However, as we all know, good health can never be taken for granted. While you may have the time, skills and talent to plan for a successful career, there is always a chance that critical illness or an unfortunate accident robs you of your ability to work and provide for yourself and your family.
To protect yourself and your family against this risk, you should consider the types of insurance policies you should be buying, namely both health and life insurance. One health insurance to consider getting include disability income insurance such as AIA Premier Disability Cover, which provides monthly payouts in the event that you are unable to work due to a disability.
You can also consider getting life insurance such as AIA Guaranteed Protect Plus (IV), which provides comprehensive protection for death, disability and critical illness, ensuring that your loved ones continue to retain the financial security you would have provided in the event you are no longer around.
# 3 Invest for your future
There are two main ways to earn. The first is through regular work, where you basically exchange your time for money (i.e. getting a job). This is what most people do when they are first starting out in life. You focus your efforts on upgrading yourself, learning as much as possible and challenge yourself to take up tougher assignments or even overseas postings to beef up your resume.
The other way to earn money is of course via returns from your investments. You can put your money into different asset classes such as savings products, stocks, bonds and properties and receive regular returns from these investments.
While we focus on the former (i.e. our jobs) in our youth, we should increasingly build the latter (i.e. our investment portfolio). In fact, investing while you are young usually gives you the best chance for long-term success, as you will have time to compound your returns and ride out market volatility.
Over time, you should gradually shift your income stream so that you are less reliant on your earned income, and have access to more passive income from your investments. Once you are able to build your passive income from investments to cover your day-to-day expenditure, you have technically achieved financial freedom.
AIA offers a comprehensive suite of investment products such as the AIA Pro Achiever 3.0, that allows you to tap on professional guidance from Mercer, a leading global investment consultant, and still retain the flexibility to halt premiums or switch funds, free-of-charge, as your risk appetite evolves.
Be life confident, today
By taking care of your savings, insurance and investment needs today, you can be confident in breaking boundaries in your career, knowing that both your family's and your personal needs will be taken care of, in the event that life throws you some curve balls.