Debt: avoid the following pitfalls

Debt pitfalls

Your first pay cheque after years of study can be quite rewarding, but now is the time to start charting a stable financial future.

“Graduates who have just entered the job market will experience a drastic change in their finances,” says Eunice Sibiya, Head of Consumer Education at FNB.

She explains that moving from a monthly allowance to a salary is a big shift in terms of cash flow. Therefore, you must manage your money more careful than ever before.

“Earning a salary is quite liberating, but if not well managed could lead to financial problems,” Sibiya warns.

She shares some of the most common pitfalls that can lead to financial difficulties for graduates.

Not working on a budget
Good financial management starts with knowing where and how your money is being spent.

A detailed monthly budget will help you track your monthly spending.

Failure to budget could lead to you running out of money before payday, which might result in you borrowing money to survive until payday.

Peer pressure
Following the latest trends and trying to keep up with friends can be costly, as it often leads to a life you cannot afford, which ultimately leads to financial strain.

Be honest with yourself about what you can and cannot afford.

Never try to match up to how other people live their lives, because everyone’s financial circumstances differ.

Impulse purchases
These have a direct impact on your budget, so plan your purchases and do not buy what you do not need.

Avoiding impulse buys will help you save for items that are really essential.

Not having an emergency fund
An emergency fund is a safety measure to cover shortfalls when an unexpected expense occurs, such as a medical emergency or car breakdown.

Such expenses can have a huge impact on your finances.

If you do not plan for them, you might end up having to tap into debt to cover the costs.

Your emergency fund should comprise at least three to six months’ of your monthly income.

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