Young professionals: 7 tips on how to manage your finances successfully

You finally made it – you are starting out on your career and will at last be able to treat yourself from your first paycheques. Why not, but spare a thought for your future as well. Adopting a few good habits from the beginning will ensure a future free of financial worries – myLIFE has a few useful tips for you.

1. Draw up a budget

Before treating yourself to the holiday of a lifetime or the latest smartphone, or embarking on a full overhaul of your wardrobe, it may be useful to establish a few ground rules for your finances. The first is to draw up a budget. This will help you manage your outgoings and avoid living beyond your means.

Start by listing your sources of income and your expenditure. If you know how much you spend each month, you can draw up a realistic budget. Get into the habit of noting down everything you spend, from your morning coffee to the weekly shop, not forgetting that parking ticket or cinema outing.

Then categorise your expenses into fixed costs (rent, utility costs, telephone/internet subscriptions, insurance, loan repayments, etc.) and variable costs (fuel, groceries, restaurants, going out, leisure activities, shopping, holidays, etc.).

You can then use this overview to analyse your spending habits and identify non-essential outgoings. Do you really need a subscription to several streaming services? Would it be better to prepare a packed lunch occasionally rather than going to the restaurant or buying a sandwich every day? And so on.

This doesn’t mean you should cancel all of your outgoings on leisure and pleasure, just make sure to include them in your budget.

If you know exactly how much you spend each month, you can draw up a budget for the year and build in the cost of holidays, car maintenance, Christmas presents, etc. in advance

=> Check your bank accounts regularly and monitor your incomings and outgoings. There are budgeting tools and apps that you can use that will send you notifications, categorise transactions and give you a clear overview of activity on your accounts.

The last step is to stick to the budget that you have set. This will be easier if you try to avoid impulse buys and superfluous expenses, think about second hand items and find out about any special offers and reductions for “young professionals”.

Be careful not to become a prisoner of your budget. It’s important to learn to avoid the pitfalls that will result in you straying from your budget for the wrong reasons.

2. Plan for the unexpected

Even when starting out on your career, it’s possible (and advisable) to set aside some money. Setting up an emergency fund will help you deal with any unexpected events and expenses: PC replacement, car repairs, rent service charges, medical expenses that you have to cover yourself (dentist, optician, physiotherapist), etc.

It doesn’t need to be a huge amount, the main thing is to make regular payments into this fund. This is what we call precautionary savings. Even on a tight budget you can gradually start to build up some capital – saving €50 a month will give you €600 in a year, plus the interest that will gradually accumulate!

Make life easy by setting up a standing order from your main bank account to a dedicated savings account. The money should leave your account at the start of the month before any other expenditure. After all, you need to pay yourself first or it will never happen! A standing order will enable you to save without thinking about it and help you to stick to your commitment.

Most banks have products specifically tailored to young professionals with advantageous subscription terms, preferential rates and attractive advantages.

3. Plan for the future

As well as helping you deal with any unforeseen events, saving regularly will enable you to prepare for the future (buying a car, a home, travel plans, etc.). There are several kinds of interest-bearing savings account that enable you to save at your own speed and you can access the money at any time.

=> Most banks offer bank products specifically for young professionals with products tailored to their needs, advantageous subscription terms, preferential rates and attractive advantages.

It’s also the right time to start to prepare for your retirement. It may seem a long way off to you, but it is highly advisable to think about it as early as possible. The earlier you start, the higher the additional income to enjoy in your retirement will be. Find out about personal retirement savings plans. Some companies will also contribute to a supplementary pension plan for their employees. These products will help you prepare for the future whilst also offering an immediate tax advantage in the form of tax deductions.

4. Be careful about credit purchases

Don’t live beyond your means, and be careful about making credit purchases. While a credit card offers many advantages, be careful how you use it. If you don’t tend to scrupulously monitor your outgoings, a debit card will be a better option for you. It will help you avoid nasty surprises at the end of the month and additional expense if you exceed your authorised overdraft.

Only use a bank loan for essential purchases. Assess your financial means before signing up and check out the terms of repayment, interest rate, monthly payments, etc. Remember that it costs money to borrow money. When you take out a loan, you are contractually obliged to repay it. That’s obvious, but it doesn’t happen on its own.

=> It’s possible to take out insurance to cover loan repayments in the event of unexpected circumstances (dismissal, accident, death, etc.). Such cover can be take out on certain conditions.

Lastly, you should be very wary of revolving loans which give you access to a sum of money to be used as you wish and which should only be used with extreme caution. The interest rates charged may be high and result in financial difficulties, particularly if you suffer a drop in earnings or do not manage things properly. This exposes you to the risk of over-indebtedness.

If you have a basic understanding of finance and the risks involved, you will be able to take better decisions and more easily spot attempted fraud or banking scams.

5. Get a financial education

Take the time to find out about and understand how the economy works and a few basic financial concepts. Talk to trusted friends and family members who have knowledge of and experience in this field. Have a look at specialist publications or websites. There are many sites, podcasts and videos offering education on budget management, personal finance, savings and investment. Make sure you choose a reliable source of information!

=> Are you familiar with the concept of the investment pyramid? This is a visual representation of the appropriate principles for capital management, which balances the need for financial security and the growth of your savings.

If you have a better understanding of the world of finance, its fundamentals and the risks involved, you will be able to take better decisions and more easily spot any attempted fraud or banking scams. These have been on the increase in recent years and have become increasingly elaborate. Whatever your situation, you should never give out your banking details. Watch out for offers that look too good to be true or investments promising exceptional returns. Approach things with a critical eye – it would be a shame to lose money that you have struggled to save because you have been too gullible.

6. Be prepared

Don’t think that mishaps and accidents couldn’t happen to you. You can take out home insurance to protect your home against burglary or fire. Your medical costs can be covered by health insurance, and car insurance will protect your vehicle. Once you have defined your needs, get in touch with an insurance company for information on the cover you require, to make sure there is no overlap in the policies.

=> Do you know that your credit card may offer protection, guarantees and insurance for your holidays, and online or in-store shopping. For more information: The benefits you didn’t know your credit card had.

7. Contact your bank

Speak to your banker to supplement the resources accessible via the online tools made available to you by your financial institution. You can talk to them about your life goals and they will be able to help you manage your money and achieve your financial objectives. It’s essential to have a relationship of trust with your bank. The sooner you start, the better!

On myLIFE you will find lots more practical information to help you manage your day-to-day finances and realise your goals!