Publish Date: 20/08/2018
Earning your first salary is an exciting, life-affirming time. It might be tempting to blow your cash on a new wardrobe, luxuries or spoils for family and friends – but if you’re smart with your planning, you could make that salary work extra hard for you.
Below are our top five tips that will help you get the most out of your first salary:
Once taxes have been deducted and your bills have been paid, you might be disappointed to see how much is left… unless you’ve already budgeted! A budget helps you organise and plan your money, allocating your income towards expenses, savings and debt repayment, and ensuring you always know exactly how much money you have. Many people avoid budgeting because it seems too difficult, but there are many online tools and mobile apps that make it easier. Click to explore this Personal Budget Planner
Start by paying off the debt with the highest interest rate – this is usually a credit card. If you have a student loan, this repayment can also be quite hefty and can take years to clear, so start as soon as you can.
A Debt Consolidation Loan can help pay off your debt through one single loan. With African Bank’s Consolidation Loan you can pay off up to five loans with low repayments and flexible terms. (Please note that Consolidation Loans cannot be used to pay off student loans or revolving credit.)
Paying off your debt is important but getting started on your savings is equally important. If an emergency comes up, it’s helpful to have an emergency fund of savings to dip into rather than getting into further debt to deal with whatever the problem might be.
The earlier you start saving, the more money you’ll have – thanks to Compound Interest. If you invest your savings in a smart investment product, such as African Bank’s Fixed Deposit account you will start to earn interest. If you continue to save that interest, you begin to earn interest on the interest. Your money works for you! (Not sure how it works? Check out this vlog where we break it down for you.)
Tip: Do your research before you agree to any investments – look for products that offer cost-effective and transparent fee structures. (Read more here: Want the best interest rate?)
Yes, of course the LAST salary of your career is the furthest thought from your mind when you’ve just started earning your FIRST salary – but start planning for your golden years now and Future You will be sitting pretty!
In South Africa, you can choose to save for your retirement through retirement annuities (RAs), pension funds or provident funds. Some companies offer an in-house pension or provident fund. However, a recent Moneyweb article states that of the 16.1 million employed South Africans, only 40% have access to retirement funds as a condition of service.
If your employer doesn’t offer one, it’s wise to invest in a RA. RAs also offer tax benefits, so you win in more ways than one. If you’re investing in a RA, be sure to have the amount debited from your account each month and consider it as a payment to yourself.
When you first start your career, your biggest asset is your ability to work and grow your career over the years to come. Protect yourself from unexpected health issues with medical and life insurance policies. Medical aid can be as basic as a hospital plan and you can choose a life insurance option that requires a minimal initial investment. Speak to your financial advisor to find the right fit for your income and your needs.
The same Moneyweb article quoted above reports that when it comes to medical aid, only 25% of South African companies offer employer-managed medical schemes, leaving most workers to make their own decisions.
Our most important tip?
Remember that many of the financial decisions you make today could have a major impact on your long-term financial future.
Click here to find out more about African Bank’s investment products, ideal for recent graduates about to embark on their savings journey:
About African Bank
Our mission is to be a successful Retail Bank offering a wide range of products and services to the consumers of South Africa. The people who work for African Bank represent the diverse population of South Africa; therefore we are a reflection of you, of all South Africans. We seek to provide value - more than our consumers expect of us. We promise to live our purpose 'humanity through banking' in all that we do and we are confident that we can, because 'We are You'.