GRADUATE FINANCE
THE COMPLETE GUIDE

You've done it. You’ve struggled your way through your degree program, showed up for graduation, and somehow managed to get your diploma. Congratulations! While student life feels like a treadmill set slightly above walking speed, graduate life is a series of alternations between an unbearable jog and an untenable trudge. Like all good questions, that of what comes next also applies to postgraduate life. You might have already found a job or an internship or you’ve just started your search. Though you’re still figuring out what adulthood means to you, the truth is that very soon responsibilities will start accumulating and time will start running out. Why not get ahead of your future self and start laying the foundations for your adult life now? This guide will help you set up the building blocks for understanding how to finance your postgraduate life.

CHAPTER 1:

Before Thinking About Financing

Before getting into the nitty-gritty of loans, investments and how to save, we need to start with the basics: making money.

Image of before thinking about financing

The first and most obvious way to make money is to get a job. Start looking for a job at least 6 months before your graduation date, as the application process can take quite a while. As this is a topic that deserves much more than a simple paragraph, you should start by reading our in-depth guides to working in the Netherlands and getting a graduate job in the Netherlands! Be proactive in your search by going on College Life WorkJobs to see newly posted job offers. 

If you’re a non-EU/EEAn international student (non-EU/EEA), about to graduate but having a hard time finding a job or internship in the Netherlands, why not look into the Zoekjaar visa? This visa allows you to spend a year in the Netherlands with free access to the Dutch labor market while you look for employment. If you’re looking to make the most of your Zoekjaar, make sure to explore, why not apply for College Life Accelerate -  a tailor made program for Zoekjaar holders.? It’s a program tailor-made for internationals connecting businesses searching for international talent in the Netherlands with foreigninternational graduates.

CHAPTER 2:

Stop Spending

Another (easier) way to make money is simply to learn how to stop spending it, or rather how to spend it wisely. While you won’t actually be making more money, you won’t pointlessly be losing itsome either. Though the first instinct of many newly employed graduates is to splurge on small luxuries, by curbing your overspending habits, you’ll gain precious knowledge and restraint that will come in handy/be useful through the whole of your adult life. 

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Learn how to budget

Why budget in the first place?

Budgeting: known by many and feared by all… The first and essential step to mastering your spending habits is learning how to budget. Budgeting is an essential skill because it helps you curb your overspending impulses: you’re less likely to splurge on junk food after a bad day if you’ve got a fixed grocery budget. Creating a budget also helps you keep track of your spending habits and financial situation. You can regain some well-needed control over your finances as well as realistically plan for the future! It’s also easier to fix and stick to long-term goals like saving for retirement or buying a home if you have a budget that also incorporates your savingssaving plan. Not to mention the peace of mind that comes with having full control of your financial situation.

Key tips for budgeting

The problem with budgets, as with most significant lifestyle goals, is that most of the time the best practices and goals that are mapped out at the beginning end up hard to stick to/keep. Creating a budget is an easy 4-step process. 

Income overview: First, gain a solid overview of your financial situation by determining your net income (after taxes) per month, adding up income you may receive from investments, jobs, and side hustles. 

Spending analysis: Then, look at your spending habits over the past three months and differentiate between essential and discretionary expenses. Essential expenses are things like rent, electricity or loan repayments; they cannot be skipped. On the contrary, discretionary expenses are things like netflix and amazon prime subscriptions or eating out every Friday; they’re expenses that you can live without. 

Set goals: You should always have a master plan or set of goals driving your budget. Once you’re well acquainted with your finances, articulate the core reasons driving you to create aand budget and the steps you hope to achieve through budgeting. Once you have both a fundamental desire and an objective driving your budget it’ll be that much easier to stick to it. You could, for example, have the desire to get out of your (student) debt and the goal of saving €100,000 over the next 10 years. 

Determine net budget: Your budget shouldn’t be based on your net revenue, it should instead be determined from your income-essential expenses. Before you get to parceling out your income into categories, determine your monthly cash flow. If you have multiple sources of revenue and different due dates for bills, the physical amount of cash you have available to spend might fluctuate a lot. By seeing when essential bills are due and income is received you can plan out not only the amount of financial leeway you have post-essential expenses but also the ideal time frametimeframe during which you can spend said excess. 

When determining your budget you should always manage your expectations and not set goals that are unrealistic. The point of a budget is to become not only more financially accountable but also responsible. That starts with setting realistic expectations that will be easier to achieve. Be sure to find ways to hold yourself accountable for any eventual violations of your budget. This could be by setting up a budgeting journal for example or actively tracking all expenses on your phone. You should definitely automate essential payments and transfers like savings or rent, so that you won’t be tempted to spend money that you theoretically don’t have.

Ideal salary distribution

Budgets come in all shapes and sizes. The most common one is the 50-30-20 budget. Here you allocate 50% of your income to fixed expenses or needs like rent, utilities, and groceries, and debt. Ideally, fixed expenses should be limited to 35% of your budget. 30% of your income should be allocated to discretionary spending or wants, so anything from entertainment to shopping to a new phone. Finally, 20% should go into savings, whether you have a retirement account or an emergency fund. Any loan repayments above minimum go into this category. It’s both for reducing debt as well as both short and long-term saving goals. 

Learn to spend frugally

Another key way to save money is by simply changing your spending habits. Even after you’ve created a budget for yourself, try to radically shift the way you spend money and stop needlessly overspending. 

Buy in bulk

Even though you’re only grocery shopping for yourself, try to buy in bulk instead of going to the grocery store once every three days. Establish a grocery list once every month or three weeks and buy large value-for-money quantities of items. Go to the market and get large quantities of veggies as it’s often cheaper. Then prep and freeze food so that it won’t go bad. This way you not only stick to your grocery list as you won’t be tempted to go shopping every 3 days but you’ll also stick to your budget.

Live like a university student

This is pretty self-explanatory. All those creative ideas you came up with to save money during uni, keep ‘em. Just because you’ve got a job doesn’t mean you have to spend your entire salary.

Roommates

Roommates are an ideal way to cut down on rent. Split rent, split groceries, split everything.

Cash Only

Give yourself an allowance and stick to only cash. Once the cash is out, it’s out and your budget for entertainment and mindless spending is gone. This is a great way to force yourself into considering the use and worth of each purchase you consider making. 

Cut down unnecessary purchases

Living above your means is a slippery slope that starts somewhat innocently. Emotional spending and FOMO can sometimes get the best of us. Blowing your money on things like a buying morning coffee and breakfast or buying lunch instead of bringing it from home. Even something as simple as eating out can save you a lot when you try to cut down on itit down. Restaurants should be for special occasions, not lazy nights in.  

Small expenses make a difference

The key to spending frugally is to always have a ‘why’  behind your purchases. Calculate the hours of work an object is worth. Wait a day before buying something. Put your costs into perspective. 

Though this seems obvious, the first step you should take when you’re fresh out of university is to start saving. Ideally, you should start putting money aside while you’re studying in order to create a comfy financial cushion you can fall back on while you’re searching for a job.

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The best way to save is not only setting aside money each month (tips on how to do that later) but also in what you do with the money you’ve saved and where you put it. 

Open a savings account

How they work

Unlike a checking account, which is your basic bank account allowing you to make transactions and purchases, a savings account is much less accessible. The goal behind a savings account is to store money inside your account and earn interest on that money. Banks pay interest in exchange for storing your money because they then us e it for loans and investment.

For example, if you initially store €1000 in an account with 1% interest by the end of the year you’ll have €1001. Though that doesn’t seem like a lot, the real advantage of savings accounts is compound interest. Compound interest means that the amount of interest you earn is calculated (either daily, weekly or monthly) based on the amount of money you have present in your account and not the initial amount you saved.  If you regularly add money to your savings account, compound interest can largely be to your advantage. 

Taking that initial amount of €1000, if you save €100 per month, by the end of the year you will have earned €16.57 in interest! (calculated with a daily compounded interest rate of 1%)

The Deposit Guarantee Scheme states that if ever your bank ever gets into financial difficulties, your credit and savings balances will be refunded. You are insured for up to €100,000 under this scheme. Before opening an account, make sure that you are covered by the DGS. Most major banks are. 

Where to open one

Most banks offer a free savings account along with a checking account so chances are you already got one when you first opened a Dutch bank account. As of now, the three major banks, ING, ABN Amro, and Rabobank all offer interest rates closer to 0% rather than 1%. 

There are four main types of savings accounts in the Netherlands. 

The first is one that functions like a checking account but offers interest. Those accounts tend to be very low interest but you’re able to withdraw your savings instantly or within a reasonable amount of time. 

Then you have a savings account where you can’t withdraw your money instantly.

Insurances: the key to staying safe

Saving money doesn’t only consist of keeping it safe in the bank but also avoiding unnecessary financial risks. The key to starting and maintaining a stable financial diet comes with spending money on preventative investments such as insurance.

Why be insured?

One of the central advantages of having insurance is that it’s an active form of risk management. It reduces uncertainty as it provides the security of knowing that x is taken care of in case of y. Insurance is essentially an agreement between you and an insurance company where the insurance company agrees to take over a predetermined risk for you. The goal of insurance is to help you pay for damages done to your property or damage you might do to others’ property. If something happens you can claim compensation or service from your insurer. 

Most of the time, lenders such as banks require some form of insurance when taking out loans. Here in the Netherlands, basic health insurance is mandatory if you are working or non-EU/EEA.

How does it work? And how to choose?

Insurance is essentially divided into two categories: damage (property and casualty insurance) and person (life and health insurance). 

Damage insurances cover damages or losses concerning the belongings or assets of businesses and individuals. Person insurances cover financial risks causeddue byto illness or death. 

In order to be insured, you need to pay a premium. The premium can be annual or monthly as is essentially calculated based on your risk as an individual or business. This process is called underwriting

In general, the higher the risk, the higher the premium. The underwriting process and conditions differ depending on the insurer. The risks they are willing to accept and situations in which claims can be made vary according to each insurer. In general, four factors influence the price of your premium: how extensive the coverage is, how comprehensive the coverage is, your personal situation (age, profession, address etc.), and the general competition between insurance providers in your area. 

Financing options

Though you should be focused on both making and saving money, certain milestones require an extra hand. As some of you have already dealt with student loans, you are already familiar with how practical and useful loans can be. Though it’s viewed as something negative, debt can sometimes be a strategic way to improve your quality of life.

Loans

Before we get into the different types of loans you can get, we’re going to start with a couple tips and strategies that help balance finding a way to finance big investments with maintaining a healthy financial diet. 

How to borrow money effectively

The secret to taking out loans is understanding how to borrow money effectively in a way that doesn’t and will not penalize you in the future. One of the first things you should do either right before or right after you take out a loan is creating a master plan mapping out all the loans you have to repay in addition to the amount that has to be paid monthly, the interest rates of each loan and including a grace period if applicable. Creating a birds-eye overview of the evolution of your debt is the best way to maintain control over the various financial obligations you will be subject to. If crafting this master plan while ‘shopping’ for a loan try to look for interest rates that are sustainable and can be reasonably worked into your budget without monopolizing half of your salary for the next 10 years. Some loans have a grace period during which they don’t need to be paid back. Usually, the interest rate is higher than if you start paying back what you owe immediately. 

Remember that monthly installments should go in the need portion of your budget and not the savings portion.  

No matter the type of loan you are looking into know that lenders will assess your complete financial situation before determining the interest. They’ll look at your income, which includes your revenue and assets and savings as well as your expenses: which includes your current living costs as well as insurance and other loans and how reliably you’ll be able to pay back your loans in case something unexpected happens. 

Mortgages

What are they?

A mortgage is a loan taken out to buy property or land. It’s a significant investment as most loans last for 25 to 30 years. years but can also be for abe shorter or longer period of time. Mortgages are secured loans which means that the value of your loan is secured by the property until the loan is fully paid off. If you fail to keep up with your loan repayments your home can be repossessed in order to compensate for the defaulted loanloan. The amount you have to repay is both based on the initial capital of the loan (the amount borrowed) and the interest accumulated during its term. 

In the Netherlands, the maximum Loan-to-Value is of 100%. This means that you can borrow up to 100% of the market value of your property.  In general, the maximum you are allowed to borrow ranges from three to five times your gross annual income.

Mortgages require an initial down payment. The higher the down payment, the lower the interest tends to be. 

Unfortunately, mortgages are harder to get if you’re self-employed or don’t have a permanent contract. Freelancers and entrepreneurs will have to show at least two or three years of income history. The longer you’ve been self-employed, the higher your chance of getting a mortgage will be. Those without a permanent employment contract will need a letter from their employer stating that that contract will be renewed if the situation stays the same.

Types of mortgages

There are two main types of mortgages in the Netherlands: Linear and annuity

Linear mortgages have monthly payments of a fixed predetermined amount. The amount of capital you have to repay does not vary throughout the duration of your loan. What varies is instead the amount of interest that you have to pay. As your debt decreases, so do your monthly interest payments as they are not calculated on the initial capital of the loan but rather what is still due. This means that initial payments will be very high but that the loan will be repaid quickly. 

Annuity mortgages are the most common. With annuity mortgages, your monthly repayments are fixed over the repayment term. Near the beginning, payments are mostly composed of interest, but near the end, they are mostly composed of capital. This means that your debt will decrease at a higher rate near the end of your term. 

Both of these mortgages are covered by the national mortgage guarantee. The Nationale Hypotheek Garantie (NHG) or national mortgage guarantee is a government scheme that ensures the repayment of small mortgages. If ever you are unable to repay your loan, the NHG will repay it for you, if you are eligible. The value of the loan needs to be under a certain threshold which is determined annually. As NHG insured loans present limited risks, the interest rates tend to be lower. 

You can opt for a fixed interest or variable interest rate. With fixed interest mortgages, the interest of your loan is fixed for an agreed period of time. You can fix your rate for a portion or the totality of the repayment term. On the contrary, variable interest rates fluctuate over time. The advantage with variable rates is that if mortgage interest rates are reduced in the future, this reduction will apply to yours. 

Who is eligible?

There are no specific conditions determining the eligibility for a mortgage. Most lenders will require proof of employment contract and income. Getting a mortgage as a non-EU/EEA citizen will, however, be more complicated. 

Lenders also have the tendency to require both life and home hazard insurance from mortgage applicants.

When you'll need one buying vs. renting

The only situation in which you’ll need a mortgage is if you’re considering buying a house or apartment. Though it may sound obvious behind this self-evident fact hides the quintessential dilemma: should you buy or rent? 

Quite simply, the main factor you should consider is time. Are you planning on staying in the Netherlands? If your stay is longer than 3 years, buying is already cheaper than renting (based on Nerdwallet’s US calculator). 

Buying represents a long-term investment and a certain long-term orientation that renting does not. 

Mortgagemonster has a great table comparing what buying and renting looks like for different apartments in major Dutch cities. 

 

Buying Renting
  • Requires significant investment as renting it out is not allowed by most mortgage providers 
  • Responsible for maintenance 
  • You have to pay property tax
  • Process of finding/making an offer on a house
  • Dependent on fluctuations of market value 
  • You have to be able to pay back your mortgage
  • Low interest rates and stable (fixed mortgages)
  • Easily renovatable and customizable 
  • Cheaper than renting in the long-run
  • The real estate is yours once the mortgage is paid off
  • Getting increasingly difficult to do in the Netherlands 
  • Rent keeps on rising
  • No major changes can be made to the property
  • More expensive/less wise in the long-run
  • Free to move at any time 
  • Little to no responsibility for the property (maintenance and taxes)
  • Eligible for rent allowance

Getting a car

Another big purchase you might be considering is a car. Though the train system in the Netherlandshere is highly efficient (most of the time) and pretty well-developed, there’s nothing like reducing a 1,5 hour commute to 35 minutes. 

What you should know before you start looking into ways to finance getting a car is that taking out a loan will have an effect on your future loan applications. Lender evaluate how likely it is that you will be consistent with your loan repayment. Previous debt is a factor that is taken into consideration and can often hinder your application.

Other personal loans and financing

Apart from car loans, student loan,  and mortgages, there is a wide variety of other loans that all fall under the same name: personal loans. Personal loans are essentially loans without a set purpose or intent behind them. The money you are given isn’t for a specific purchase or goal like paying your tuition fees or buying a house. Personal loans tend to be unsecured unlike mortgages or car loans which have either the property or the car as collateral in case you default on your loan. What this means is that the interest rates will be considerably higher. All debt needs to be strategically acquired, as it represents a significant financial engagement. As a rule of thumb, never borrow money for something you can buy or acquire through saving and budgeting. Medical expenses, emergencies and vacations should all be planned for ahead of time and have a designated spot in your budget.

CHAPTER 4:

Investing

The last and probably most vague step you should take towards financing your graduate life is starting to invest. Though the realm of investing seems limited to venture capitalists and hedge fund managers (who?), it’s not as complicated as you might think. However, you are warned that investing is one of those fields where you never stop learning about it.

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Now that you’ve learnedt how to save your money and use several strategiestacticssmart ways to finance lifestyle milestones, it’s time to learn about where to place it so that you can multiply itmake more. The earlier you think about investing and smart ways to place your money, the better off you’ll be. With investing, time is literally money. 

Investing 101: Assets and asset classes

Before we get into strategies and best practices, it’s better if we start by dissecting the different components of investing. To put it simply, when you invest, you exchange money for an asset. Investopedia defines an asset as “a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.” In other words, it’s a resource purchased with the expectation of growth. 

Asset classes

Now that you know what an asset is you're probably wondering what type of assets are out there. Though asset classification is a thorny subject, in general, assets can be divided in three ways based on convertibility, physical existence, and usage. For entrepreneurs and business owners, asset classification is a key part of accounting and understanding the risks your company is undergoing.

Convertibility

Classifying assets based on their convertibility means differentiating them based on how easily they can be converted into cash.

Current assets: Current assets are also known as liquid assets. They can easily be converted into cash or an equivalent within a year. Cash, stocks, and marketable securities are all considered current/liquid assets. These tend to have a short lifespan.

Fixed assets: Fixed assets are the opposite of current assets. They can’t easily be converted into cash and are also called long-term assets because of their durability. Well-known fixed assets are: land, art, and patents. Because of their longevity, fixed assets are prone to depreciation: their value decreases over time.  

Physical existence

This one is pretty obvious, assets are differentiated based on whether they physically exist or not.

Tangible assets: Tangible assets are assets that can be seen, felt or touched. Cash, real estate and even stocks are all considered to be tangible assets.

Intangible assets: Intangible assets have a theoretical existence. Things like patents, franchise agreements, copyrights and brands are all intangible assets. This class exists because though these objects can’t be physically exchanged for cash, they are both possessors and producers of value, though this value is often hard to determine.

Usage

Finally, assets can also be differentiated based on whether or not they are required in the daily operation of a business. Not very useful for people with a 9-5 but might come in handy for the few entrepreneurs and freelancers out there. 

Operating assets: Operating assets are those that are used in the daily operation of a business, things like machinery, patents, and copyrights.

Non-operating assets: Non-operating assets are those don’t participate in the daily operation of a business but still generate revenue. Short-term investments and interest earned from savings are some examples of non-operating assets.

Types of Assets

Now that you’ve seen that assets can be divided into classes based on similarities in their properties or use, it’s time to look at the most common types of assets.  

Securities

Chances are unless you’re an investment aficionado, you don’t know what a security is. A security is a fungible financial instrument with a certain value, which in English means that it’s an asset that can be traded or exchanged with assets of the same type for the same value. There are two main types of securities: equity securities and debt securities.

An equity security is a type of security representing ownership of an entity and a debt security represents money that was borrowed and needs to be repaid. Equity securities are also known as stocks and the most common debt securities are bonds.

Stocks or equity

When people think about investing, most of the time,  the first thing they think of is the stock market. Stocks have embedded themselves into our collective consciousness through the media, very often tied to images of adrenaline junkie traders winning and losing millions in mere seconds. Luckily for you, investing in the stock market isn’t usually such a high-risk endeavor. It is, however, the easiest and fastest way to earn money through investing.

Stocks and equities are essentially the same things. While stock is an ownership share of a company, equity refers to the value of the said share if the company’s debts were repaid and assets liquidated. When you buy stocks of a company, you are buying shares of the company, though this does not mean that you now own the corporation, it does mean that you are in turn entitled to a portion of its profits (through dividends) as well as voting rights. Not all stocks pay dividends, so another way to earn money through is to sell your shares for a profit. They tend to be a risky investment, solely because your return is dependent on the theoretically unlimited growth of the value of your stock. A great intro book for those of you looking to dive into the intricacies of stock market investing is The Stock Market Cash Flow, Four Pillars of Investing for Thriving in Today's Markets by Andy Tanner. 

Fixed or income bonds

Bonds are debt securities. This means that instead of representing ownership of a corporation, they represent a loan that you have issued to an institution or corporation. Bonds are known as fixed-income investments because the company or organization you have lent money to has agreed to the obligation of paying back the loan with interest. A bond specifies not only the amount of the loan (the principal) but also the interest rate and repayment dates. The principal is repaid when the bond matures. Like stocks, bonds can be sold and bought before they reach maturity. You can sell a bond for more or less than face value (initial investment). Bonds are counter-cyclical, when the market is at its peak they tend to depreciate in value and when the market is dipping, more investors are interested in bonds, which lowers their interest rates

Money market or cash equivalents

While the name of the financial game is long-term investment, money market instruments are the exact opposite. They are short-term debt securities with maturities ranging from one day to one year. Essentially, the money market is a place for short-term lending and borrowing and surprisingly is the investment which offers the most security. This is because businesses and banks are less likely to default over such short periods of time. 

Common money market instruments include treasury bills, certificates of deposit and commercial instruments. 

Treasury Bills

A treasury bill is a short-term debt issued and backed by the government, in this case by the ECB (European Central Bank). Think of it as a government bond with an incredibly short maturity. 

Certificates of deposit

Certificates of deposit are certificates guaranteeing a “time deposit”. This means that you lend the bank money under the form of a deposit for a certain period of time and through the certificate the bank guarantees to repay the money plus interest at the end of the specified time period. 

Commercial instruments

Commercial instruments are short-term debts directly issued by corporations. They typically mature under 270 days and are a means for corporations to get quick financing. Because they are unsecured loans, corporations issuing commercial paper are often virtually debt-free and highly unlikely to default

Real estate or other tangible assets

Less abstract and easier to deal with most tangible assets are a great way to invest in something that you can enjoy. Things like art, cars or vintage wine are not only great collectibles but also wise investments. As long as you keep the right documentation, are aware of their evolution in marketplace value and are willing to protect them. 

The most common tangible asset to be invested in is real estate. From the moment you decide to buy a house, you are actually investing in real estate even though the return on investment is essentially null as you are living in your home. There are three main types of real estate investments: 

Buy to let

This is the most traditional form of real estate investment. In this instance, you buy a property in order to act as a landlord and collect rent as a return on investment. While doing this means that you have to deal with issues such as maintenance, unruly tenants and repairing any damages, renting out a property essentially kills two birds with one stone. Not only do you collect rent to buy off your mortgage (and make a profit) but if you’ve played your cards right, when your mortgage is paid off you should be left with a more valuable asset than you had to begin with. Real estate is one of the few tangible assets that tends to appreciate with time. 

You should keep in mind that regular mortgages in the Netherlands are not suited for buying to rent.

Real estate investment groups

A real estate investment group is sort of like a mutual fund. A company buys or builds properties which investors can then invest in. What this means is that although you own that property, the company is the one that takes care of maintenance and repairs and handles all of the tenancy details. They do, however, take a portion of the rent. 

Real estate investment trusts

The most abstract form of real estate investment, REITs are essentially shares of real estate. Corporations sell stocks in order to purchase and manage properties. The investors then receive regular dividends as REITs are obliged to pay out at least 90% of their profit. The core advantage of REITs is that they provide a stable income without the hassle of managing a property. 

In need of some recommended reading? Check out the Abcs of Real Estate Investing by  Rich Dad Investors, it’s a great introduction to the subject matter. 

Principles of Investing

Now that we’ve covered assets, asset classes and types of assets, it’s time to move on to the most interesting part: what you should do with them.

Before we get started

Most assets such as stocks and bonds are market investments. This means that they are traded and exchanged on financial markets unlike real estate or high value collectibles. The market, as nebulous as it sounds, actually functions in cycles of debt and profit, it waxes and wanes if you will. The constant boom and bust of the financial market happens on two scales: a short term weekly, if not daily, fluctuation and a long-term crash and growth pattern, the last crash being the 2008 recession. Though most professional traders try to game  this inconstancy to earn as much as they can, the average investor shouldn’t fear it. As the average market return is 7%, investing is best seen as an extremely long term project, which uses market fluctuations to its advantage.

Always invest what you can afford. This is the main reason why investing is the last section of this guide and not the first. As investments are long-term engagements, usually for 10+ years, it makes no sense to invest beyond your means only to pull it out early. In that vein, organize your investments so that you won’t have to micromanage them. An ideal investment is both low-key and low stress; after a year or so, you’ll be grateful for the peace. 

Asset liquidity

You’ve probably already heard the term liquidate thrown around in reference to assets, but what does it mean? Asset liquidity is essentially cash convertibility. A liquid asset can easily be converted into cash and generally must be in an established market with a large number of interested buyers. The advantage of liquid assets is that their value is stable due to the ease with which they are exchangeable for cash. 

The goal of any investor is to maintain liquidity. This means having enough liquid assets (cash and checking account included) to maintain your financial responsibilities without liquidating any fixed (non-liquid) assets. This should inform your investment strategy as you should strive for a portfolio composed mostly of liquid assets. This is especially true for young graduates as your personal capital is currently held in the form of potential and intellectual capacity. 

Risk/opportunity

Risk and opportunity are proportional. This means that an increase in one of them entails and increase in the other. High risk investments such as equity present the most opportunities for  high returns. Because of this core tension, there are two main investment styles: protecting and growing. Low risk, low yield investments such as bonds are more of a means of protecting your cash through the investment in an asset rather than growing your wealth. Low risk investments are ideal because of their stability. On the other hand, high risk investments are active means to grow your wealth. The risk here is due to the volatility of high-yield investments. Unlike bonds, stocks do not have a guaranteed return. There is nothing guaranteeingensuring that your investment is worthwhile.

As a rule of thumb, the more money you have, the more you have to lose. What this means is that high risk investments are not for dumping your life savings into. The bigger the amount you want to invest, the lower the risk you should be exposed to. 

Budgeting, mortgages, investing… There’s nothing more terrifying than realizing that the basic stepping stones of adulthood don’t come with an instruction manual, but hopefully this guide helped you get started in the right direction. Now that we’ve covered the abcs to navigating the world of finance as a graduate, it’s your turn to put this information to use! Need more than a couple paragraphs of wisdom? We’ve partnered with Blue Umbrella to give graduates the help they need navigating taxes, allowances and loans in the Netherlands. Check out our income tax, housing allowance and healthcare allowance calculators  to start offget started on the right foot.