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A 2019 survey says:
9 in 10 adults say nothing makes them happier or more confident than having their finances in order.
Some goals will take years — if not decades — to reach. That’s part of the plan!
Whether you are a senior worker with years of experience, or a fresh graduates stepping up the career ladder, it is never too late to start managing your own finance.
Yes.... the best time is NOW!
Here we share the 7 key steps you can start with...
1. Set short-term and long-term goals
1. Set short-term and long-term goals
Creating a master list of all your goals is a smart first step.
It’s always easier to plot a course of action when you are clear on what you’re looking to achieve.
Short-term goals (in the next year or so):
Short-term goals (in the next year or so):
Build an emergency fund that can cover at least three months of living expenses.
Keep new credit card charges limited to what you can pay off, in full, each month.
Pay off existing credit card balances.
Hint: Create and follow a budget.
Longer-term goals :
Longer-term goals :
Start saving at least 10% of gross salary every year for your retirement.
Save for a home.
2. Create a budget
2. Create a budget
A budget = A line-item accounting of all your income (salary, a side gig, income from an investment) + all your expenses.
Purpose = to lay everything out in front of you so you can see where everything is going and make some tweaks if you’re not currently on course to meet your goals.
Tools = MS Excel, Google Sheets, or budgeting app that you can install on your phone. You choose.
3. Build an emergency fund
3. Build an emergency fund
It starts with setting a goal for how much protection you want to build.
Minimum 3 months’ worth of living expenses saved in an emergency account.
From COVID-19 pandemic we learnt it the hard way that emergency period can last for years. So... having it 6 months to 1 year is even better.
4. Pay off credit card debt
4. Pay off credit card debt
Credit card has the highest interest rate of all loans. Indonesian credit card will charge you 3% per month for every unsettled balance. That's 36% a year!
Use “Snowball” strategy
Send your extra monthly payments to the card with the smallest unpaid balance.
Good effect of this strategy is the psychological mojo
Your smallest balance paid off will boost your motivation to pay off the next larger balance, and in return will save you more money.
5. Save for retirement
5. Save for retirement
Even if you have decades to go until retirement, the time to get started saving was yesterday.
The longer you wait, the more you will need to contribute to land in retirement in good shape.
Set your goal of what level of lifestyle you want to spend after retiring.
Like emergency fund, calculate of how many months of living expenses to spare in your retirement account.
6. Invest with a long-term focus
6. Invest with a long-term focus
Stocks can be volatile at times, though over long periods (10 years or more) they have historically delivered higher returns than bonds.
Nowadays, you don't have to go to the bank. You can buy and sell stocks and bonds on your own mobile apps.
Stocks might have bigger amount of initial investment, but bonds and mutual funds are as small as Rp 100,000 to start with. Do your research and choose which one you see fit at your current financial state.
7. Borrow smart
7. Borrow smart
Only borrow what you truly need.
It is tricky to buy a house/car/college education, because the lenders are focused on the maximum you are allowed to borrow.
Wants or Needs? It’s on you! Your goal is to borrow as little as possible
Be thoughtful! Example:
Do you need a new car with every premium package?
Consider a used car = someone else pay for the 40-50% depreciation
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