What to do after getting your first job
You’ve just started your first job, now your career and your future stretches out before you and you’re thinking about how far you can go and, like any other journey, you will need a plan.
You are finally receiving a salary. A regular income. What’s more, as you move up in your career, so is your salary going to grow bigger.
Managing your money well translates into having more of it; and good money habits will ensure that you grow your wealth and become ready for the possibilities of a great life. Whether it’s starting a family, buying a new car or going to a hospital, good financial planning means you will be able to deal with these situations.
So, it’s the beginning of your financial life and there is no reason not to think big. But first, you need to think ahead.
There are two crucial things you need to start thinking about to create the best financial future for yourself:
- Managing credit and debt
Budgeting – planning to make the most of your money
This is probably the most important part of your financial life. With a budget, you will be able to understand your financial situation. What you can afford, what you are spending and what you will need to save or pay.
A widely accepted way to budget is to divide your salary according to the 50/30/20 rule (from All Your Worth: The Ultimate Lifetime Money Plan by Senator Elizabeth Warren):
- 50% on essentials
- 30% on things you want
- 20% on your savings
Start by listing all your expenses. Food, car, rent, what you spend when you go out, what you spend on clothes. Really, you need to list everything: the coffees you buy at work, DStv or Netflix subscriptions, the newspapers you buy, the drinks you had with your friends – everything.
Then list all the income that you receive.
Now highlight all your necessary expenses – these are your essentials, the things that have to be paid each month: rent, petrol, electricity, water, bills, etc. They should not take up more than 50% of your income. If they do, you are probably living beyond your means and eventually this is going to catch up with you.
Then subtract 20% of your income and put it into a savings account or an investment like a unit trust. There are many ways to grow your wealth over time – invest in unit trusts, tax free savings or any savings accounts where you can earn interest. A good idea is to visit a financial planner for advice on investing and managing your wealth.
Finally the remaining 30% of your income is yours to spend on whatever you want! Dinners, holidays, hobbies – you can spend this money without any worries.
If you follow the 50/30/20 rule, you will be able to fulfil all your obligations, take care of your future and most importantly, enjoy your life. So be sure to stick to your budget!
Managing credit and debt to get ahead
Credit is one of the most important parts of your financial life. Your credit history determines how much money you can borrow and how much it will cost you. When it comes to buying a car, a house or renting a property, your credit history will be the deciding factor as to what you can buy and whether your application is accepted.
The quickest way to build a good credit history is to get yourself a credit card and use it smartly. That means paying off your card every month. Paying off your credit card means that you can benefit from the interest-free period of 57 days for credit card transactions done at retail point-of-sale machines and for online purchases. Even better, try and pay more than you need to pay each month. As time moves on, you will be able to access more credit.
You must, however, use your credit responsibly. Spending a lot on your credit card means that you will struggle to pay the minimum payments due on your card. This will push your credit rating down. If you set up a debit order to pay your credit card balance, you won’t have to remember to pay, you will pay on time and you can earn Absa Rewards, which results in cash paid into your account.
Debt obligations impact your credit rating, so you need to manage your debt carefully. If your debt obligations are excessive, be strict with yourself and prioritise your debt repayments:
- Always pay on time
- Pay more than the minimum repayment
- Make extra payments whenever you have extra cash
Remember: Paying off your debt will help increase your wealth (disposable income) and your credit rating.
Credit is an excellent means to get yourself ahead and to afford the things you really need if you use it responsibly and wisely – so start your good credit habits now.