Starting your first job is the beginning of an exciting journey. If you belong to the cohort that just graduated from college, you will find yourself in a new environment quite different from campus. You will probably feel excited about your newly gained freedom, now that your teachers and parents are no longer in their jurisdiction. And making your own income that’s most likely higher than the pocket money your parents gave you, you have all the reasons to celebrate.

But that freedom can also make you feel giddy. We have heard too many stories that Singaporean youths just can’t leave an extra cent in their bank accounts and often face the specter of a personal financial disaster. According to a 2014 survey cited by AsiaOne, 25% of young Singaporeans have less than S$6,000 savings, while 36% have no savings at all.

If you end up in that situation, you are treading in a dangerous territory. Accidents happen every day, be it illness, injury or physical disability. One unfortunate event is all it takes to bring you down on your knees. The risk of losing your ability to work is a serious one, and you should guard yourself against that risk from the start.

Financial planning is important in every stage of life. When you make your own income, the first thing you need to get your head around is buy an insurance to protect you from possible financial loss.

You might have questions about what type of insurance you should get and how much coverage you need. Let’s go through the process step by step.

1. Choose the right type of insurance 

The basic types of insurance include health insurance, life insurance, car insurance and home insurance. There are also travel insurance, mortgage insurance and some others. Deal with what you need the most for the moment, which is life insurance or health insurance.

Travel insurance can be bought on a per-trip basis, which doesn’t cost too much. Car insurance and home insurance are usually not the top priority for people who just found a job. If you can afford a car and a home the moment you leave campus, you are probably rich enough to have your personal financial advisor to make recommendations for you.

2. Find the right coverage

Check with your company and your family what kind of insurance they have already provided to you. You might have been covered by their policies, partially or even entirely.

For example: some companies provide health insurance to employees; some household may purchase life insurance that covers every family member.

If you are not clear about the benefits and coverage, talk to your HR officer or a contact person from the insurance company. Find out the gap between the coverage you have and the coverage you need. The financial advisor will be able to recommend a plan and fill that gap.

3. Do your homework

If you are buying a life insurance policy, do your homework before you meet a financial advisor. The premium will come at your own cost, so make an effort and be sure it is worth it.

In April this year, the government launched a new web portal compareFIRST for Singaporeans to compare life insurance products from different financial institutions. You won’t become an expert just by browsing the website, but you will get a sense of the difference in premiums and benefits of different products.

You can use the tools on the website to assess what you need and how much you can afford for the coverage you want, and note down the products you are interested in. Then call a financial advisor and let him help you clear the doubts you might have.

4. Make a plan and stick to it

When you were young, your family was doing all the planning for you, including financial plans. Now you are on your own, you need to take responsibility for your own life.

Once you have chosen the right insurance after a sit-down with a financial advisor, you will have a general idea about how much you need to pay for the policy and whether the payment is on a monthly or yearly basis. With that in mind, you can set a financial goal for yourself and start working towards that goal by making a plan.

It is important that you understand how much you need to spend and how much you need to save every month. An average fresh college graduate earns a monthly salary between S$2,500 and S$3,000 (it varies depending on your line of work and a bit of your luck). Your income is unlikely to jump a big notch in the first one or two years. So get the figures right and set aside an amount for your living expenses, an amount for the premium payment and if you are disciplined, an amount for savings – however little it might look.

It is always easy to have a plan but difficult to stick to it. For young working adults, one important thing to remember is that you need to watch your lifestyle. The world is filled with temptations and we can fall into them more easily when we are young. Shopping sprees and drinking binges can give you instant gratifications and make you feel good for the moment, but too much of it will only drag you away from your long-term goals.

That said, go for a fancy meal at a restaurant or buy a snappy gift for a special occasion is not a big deal, as long as you are aware of how much you spend and monitor your expenses on a regular basis. You don’t have to live like a monk, but stay in control of your own spending is always a wise thing to do.