It was a warm, humid morning in July 2023 when Hossain Shamim was walking towards Banani from Mohammadpur. He was going to meet some of his university friends and explore job opportunities.
He recently lost his job and could not afford an Uber or a CNG-auto rickshaw.
Shamim completed his Bachelor of Business Administration (BBA) from Primeasia University and joined a marketing agency with a salary of Tk18,000.
Living alone in Dhaka while his parents resided in his hometown of Khulna, he grappled with expenses such as rent, food, and transportation.
“My money was gone by the month’s end and I did not know how to save; let alone invest with such limited resources,” Shamim shared with The Business Standard.
According to the University Grants Commission’s (UGC) annual report of 2020, a total of 290,246 students graduated or completed post-graduation from 46 public universities, while 65,115 students graduated from 107 private universities in Bangladesh. This means that more than three lakh students graduate every year in the country.
By documenting your daily or weekly spending, you can gradually gain a comprehensive understanding of your financial habits. If you know it is an extra pack of cigarettes, or a buffet dinner at that Gulshan restaurant, you will know when to cut back on those, so you can set some money aside in case of an emergency.
However, the employment scenario remains challenging for fresh graduates. Many of them remain unemployed and those who do secure jobs often find themselves earning salaries like Shamim, in the range of Tk15,000 to Tk30,000.
The prospect of a six-digit salary seems like a distant dream for many. Only a fortunate few manage to secure a starting salary of around Tk50,000 in their first jobs.
Countless young professionals face similar struggles like Shamim as they transition from academia to workforce.
However, while a luxurious life may not be feasible, a proper personal finance management can significantly improve one’s life.
By carefully managing expenses, saving diligently, and making prudent investments, fresh graduates can navigate their early career years more effectively.
Know your expenses
In addition to fixed expenses such as housing, food, and transportation, there are numerous hidden costs that we incur in our daily lives. You could keep a daily record of such costs, either in a notebook or on your phone.
By documenting your daily or weekly spending, you can gradually gain a comprehensive understanding of your financial habits.
If you know it is an extra pack of cigarettes, or a buffet dinner at that Gulshan restaurant, you will know when to cut back on those, so you can set some money aside in case of an emergency.
Everytime you swipe a card, you receive an SMS on your phone, right? You could also add all those and have an idea about where you are spending your money.
Save as much as you can, and start investing
Renowned American businessman, investor and philanthropist Warren Buffet said, “Don’t save what is left after spending; spend what is left after saving.”
Financial planners suggest that Elizabeth Warren’s money-management guideline, introduced around two decades ago, remains relevant today, albeit with some adjustments.
Warren was a Harvard Law School professor at the time and popularised the 50/30/20 rule in her book ‘All Your Worth: The Ultimate Lifetime Money Plan’, which she co-authored with her daughter, Amelia Warren Tyagi, in 2006.
Basically, this rule states that half of one’s income is allocated to essential expenses like rent and utilities while 30% is spent on say, a Bandarban trip or a Netflix premium account.
The remaining 20% is designated for savings, whether for emergencies or paying off credit card bills.
However, nowadays, according to a Time magazine article, financial experts advise that younger individuals, who have more time to save for retirement, can be flexible with the 20% savings portion.
Michael Finke, a professor of wealth management at the American College of Financial Services, suggests that a breakdown of “60/30/10” (60% for needs, 30% for wants, and 10% for savings) might suffice for young adults, allowing them to gradually increase their savings rate as they age.
“It varies from person to person, family to family, depending on monthly salary, the nature or distance of job location – but the usual should be at least 30% every month in the first two years. So, if you’re earning Tk25,000 per month, ideally one should target saving around Tk8,000-9,000 every month,” said Zeeshan Kingshuk Huq, a career coach and an e-commerce businessman.
And it’s wise to begin setting aside money for retirement as soon as possible, even if the amount seems small. What we forget in our 20s is that we won’t always remain in our 20s. You hit your 30s and 40s in the blink of an eye!
While many of your peers may already be doing this, an intelligent move is to store your savings in high-interest accounts like bonds or stocks to safeguard them against inflation.
Establish a personal savings goal. For instance, you might aim to save Tk1,00,000 over a period of one and a half years.
Once you achieve your goal, consider making small investments. There are numerous investment options available in our country, including monthly deposit schemes offered by banks or financial institutions, as well as the stock market.
You can always start small with as little as Tk500 or Tk1,000 every month and put them in a fixed deposit. You can also buy shanchaypatra or savings certificates.
As you start earning more, you can explore other investment options.
“Aside from these, another lucrative investment option is purchasing real estate over a mid-to-longer term (5+ years) on monthly-instalments. Personally, this gave me the highest return, however, it is slightly less ‘liquid’ so you need to be patient,” said Zeeshan.
Moreover, you can consider spending some on insurance company schemes which gives you modest returns but with health or accidental coverages.
Debt management is important
Another crucial consideration is debt management. If you have any outstanding debts, your priority should be to repay them promptly.
This is because debt, whether personal or from a bank, can potentially become a significant financial pitfall. As a new employee with a modest income, it’s advisable to avoid taking on additional loans.
Once you’ve accounted for your monthly costs and addressed any debts, you should establish a budget for your monthly expenses.
Avoid impulse purchases for yourself, friends, or loved ones, and refrain from living beyond your means.
Ensure that your expenses do not exceed your income. It’s also recommended to avoid obtaining credit cards for at least the first two or three years of your employment.
So, if you know you can’t afford that Tk3,000 Anastasia Beverly Hills lipstick or that Tk8,000 vaping pen that all of your friends are using, then don’t buy it using a credit card, please.
Be careful with your Gen Z mindset
A fresh graduate in 2024 was most likely born in the late 1990s, thus belonging to Generation Z, or Gen Z.
Research indicates that Gen Z are more socially conscious than their previous generations. Their perspectives on higher education, economic stability, and social issues are deeply influenced by their social environment.
Similarly, social habits play a role in their spending behaviour. Gen Z stands out as the generation with the highest percentage of social buyers, according to various national and international media reports, who make purchases through social media channels.
With technology and social platforms at our fingertips, it’s crucial to be intentional about spending. Before making a purchase, consider asking yourself questions like, “Do I truly need this?” (no, in most cases) or “Do I already own something similar?” (yes, in most cases).
To buy new things, wait and keep your eyes open for sales. Every year, multiple stores give a sale on their products.
For example, in winter clothing brands give a huge discount on summer products and at the end of winter, they give a huge discount on winter products.
“Throughout my career, I always looked for bargains. Almost all stores will have sales during mid January (end of winter, ahead of Valentine and Eid) and October or November (ahead of winter) — I wait for such sales, the offers, to buy and store items for future usages.” said Zeeshan.
