Most first-jobbers entering the workforce would find themselves financially self-reliant for the first time. You might think that you now have a lot more disposable income to spend compared to your days as a student, where you survived (fairly comfortably) on monthly allowances and/or part-time jobs.
However, there are costs that you may not realise you will have to incur as a working adult. These costs, while not necessary all the time, may end up taking up a fair portion of your take home pay.
#1 Work-Related Costs
When you work, you tend to spend more. Expenses for transport and food will probably increase significantly. Gone are the $85 monthly student concession passes that give you unlimited MRT and bus rides, replaced by the $120 adult monthly passes – 40% more expensive. That doesn’t account for the days you wake up a little later, and end up having to take a Grab/Uber/taxi to work through numerous ERP gantries in peak hour traffic.
As you get used to working daily, going out for lunch with your colleagues becomes an everyday routine as well. While there are more affordable options like hawker food for you to keep your food expenses small (about $120 a month), there will be the occasional consensus to eat somewhere fancier for a change. You might also purchase more snacks to munch on in the office, which can also add to your monthly food expenditure.
#2 Taking More Responsibility in Your Family
With an increase in income as a working adult, achieving financial independence suddenly becomes within reach. You no longer have to take allowance from your parents, and you start paying for your own mobile and subscription bills.
You may also feel the need to contribute more to your family, by way of helping with family expenses. This could include paying for things that your parents used to pay for, such as groceries and utility bills. You could also begin giving monthly allowances to your parents. Helping out in the family is something nice, and for some families, necessary, but a budget should be allocated for it so that you do not get blindsided by the amount at the end of the month.
#3 Lifestyle Changes
Though working takes away a lot of your free time, the nature of your (corporate) social life changes as well. Depending on the nature of the industry that you are in, networking and bonding with your colleagues may involve having nice dinners at restaurants, or a couple of drinks at the bar – expenses that can really add up, even if they only happen once a fortnight.
When it comes to your personal social life, you only have week nights and weekends to spend time with yourself, your friends and family. You may overspend to compensate, thinking: “Since I don’t have much time to spend this money anyway, I might as well spend more to have a nicer meal”. It could be a night out with friends, or a shopping spree with your family. As such, your discretionary spending increases.
When we are working in a job that is challenging, we might end up spending to relieve ourselves of stress, or to encourage ourselves for the hard work. TGIF and YOLO should not be excuses to overspend, nor should payday splurges be uncontrolled.
#4 Loans and Payments
As you set afoot into the working society, you realise you may have a lot more things to pay for than expected. Some of you may receive letters from banks congratulating you on completing tertiary education, and informing you that they will begin charging interest on your student loan from a specific date, and they look forward to receiving your first repayment. Some of us may even need to chip in to help with our family’s household expenses or housing loan repayments.
Being responsible for your financial independence inevitably means you have to purchase your own insurance, and pay the monthly premiums. Getting a basic hospitalisation policy and life insurance is probably the bare bones of making sure you are covered, and depending on the policies you purchase, these premiums can set you back about $200-300 a month.
For the most part, these expenses are often overlooked but mostly necessary when it comes to transiting from student life to adulthood. Setting aside budgets to account for them can help you better manage these expenses, so you have a better idea of where your money goes and what you can do about it.