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After securing your first job, there’s nothing quite as exciting as the moment you receive your first salary. It wouldn’t be a surprise if you are already thinking about everything you want to buy for yourself. Perhaps you are thinking about the latest mobile phone model, a new car, designer wear or your next holiday travel plan.
 
But before you start spending, let's take a moment to see what else you can do with your paycheck. Why not take the first steps to build your financial safety net? Here's how to get started.
 
What should you do when you get your first job?
 
For most first jobbers, the joy of landing your first real job may get you thinking about being able to spend your own hard-earned money for the first time.
 
But what most first jobbers do not realise is that a lot of the goals you want to achieve in life need financial planning to make sure you don't get into serious debt when trying to achieve them.
 
Here are some common financial pitfalls that first jobbers should avoid:

• Spending more than you can afford to pay each month using your credit card.
• Spending all your money on what you want but may not need such as buying the latest smartphones, branded clothing, or on an imported car.
• Taking on new debt and applying for new credit cards before settling your existing debt/s such as your student loan.
• Not planning your expenses based on your income.
• Taking shortcuts in your financial planning.

 
Having a job and earning a steady income is only the first step to building your financial safety net. You can still lose your job or face an unexpected emergency that will cost you more money than you have right now. Scary as this may sound, these are situations that could happen to you. This is why you need to make a financial plan to start saving money before thinking about all the things you want to buy and spend on.
 
Building a financial safety net should be your first financial goal.
 
Here’s how to start building your own financial safety net
 
It’s important to understand that building a financial safety net takes time and requires discipline. This is why it’s very important for you to start the process as soon as possible.
 
Here's a step-by-step guide you can follow:
 

1. Create your financial goals

 
These are what you want to achieve, or any big purchases you want to make in the future using your income.
 
Here’s an example of how you can divide your financial goals according to the time frame it might take to achieve them:
 

Short-term (3 – 6 months)	Medium-term (1 – 3 years)	Long-term (more than 5 years)
Start an emergency fund Start saving	Pay off student loans Down payment for a vehicle Getting married Start investing	Down payment for a home Retirement

 
When planning your financial goals, identify which ones take longer and get started on these as early as possible.
 
For example, if you start saving and investing RM100 per month with a conservative return of 3% per year, your savings can reach RM40,000 after 25 years. If one of your goals is to save RM100,000, you can also set shorter- and longer-term goals such as your first RM10,000 in 3 years, your first RM50,000 in 5 years, and the ultimate goal of RM100,000 in 10 years.
 

2. Plan your income and expenses

 
A simple way to get started is to separate your fixed expenses from your income.
 
Examples of fixed expenses can include your transportation costs, your food costs, your housing bills and rent, and other unavoidable expenses in your daily life.
 
It is also recommended for you to plan any additional expenses, such as your phone bills, clothing purchases, and your internet bills.
 
Here are some popular financial planning methods you can try.
 

• The 10-10-10-70 method from Chief BerUang, PIDM’s savings icon. In this method, you separate your monthly income into four categories: 10% for savings, 10% for emergencies, 10% for insurance, and 70% for your expenses.
• The ‘envelope’ method. The envelope method asks you to put your money into envelopes, according to what that money is going to be used for. So, money you have put in the envelope for paying the rent should not be used for other purposes. This method can help you avoid spending money you haven’t budgeted for without planning ahead.
• Zero-based budgeting. The concept is similar to the envelope method where you need to assign specific ‘jobs’ for your money. But where it differs from the envelope method is that zero-based budgeting requires you to assign your money, down to the last ringgit. Even if you have RM500 ringgit left over after putting money aside for your monthly commitments, that RM500 should be assigned a role, like your emergency savings. This helps prevent you from treating it like extra spending money and buying things you don’t need using that money.

By carefully planning your income and expenses, you can ensure that you won’t be spending more than you can afford.
 

3. Get yourself insurance protection

 
One of the biggest misconceptions among younger people is that insurance is not necessary. The truth is, it doesn’t matter how young or old you are, insurance is an important part of building your financial safety net, as it offers a financial buffer in case of an unexpected accident or illness.
 
There are two main types of insurance that you can consider:
 

Life insurance	Medical insurance
Ensures that your family won’t be adversely affected financially if something unfortunate happens to you. Provides financial protection if you get involved in an accident which leaves you unable to work.	Ensures your finances won’t be taking a hit if you fall sick, no matter how serious it is. Reduces the burden of medical costs and avoids using up all your savings to cover the costs.

 

4. Start an emergency fund

 
Starting your emergency fund is really simple. All you have to do is put aside some of your income into your emergency fund every month.
 
An emergency fund is also very useful when something unplanned happens to you such as a loss of income, unexpected home or vehicle repairs, health problems and others.
 
So just how much is enough for your emergency fund? It is advisable for your emergency funds to be enough to cover your expenses for 6 months.
 
Here’s an example of how a first jobber can start building an emergency fund by saving a fixed amount of income each month:
 

Monthly salary	Monthly expenses and commitments	Amount saved monthly	Targeted emergency fund amount	Time taken to reach targeted amount
RM2,000	RM1,000	RM200	RM6,000	30 months

 
You need to stay disciplined in order to make sure your emergency funds keep growing. It may take months and years, but you need to start somewhere.
 
Start building your financial safety net from today
 
As a first jobber with few to no commitments, the best time for you to start building your financial safety net is now.
 
You can avoid serious financial problems in the future if you have a back-up plan in a financial safety net so that no matter what happens to you, at least you’re covered financially. So, start your journey to financial security today. #SediaPayungKewangan