You’ve dreamt about receiving your first paycheck - and finally the day has arrived! But how should you spend it so that you have money for the things you want, today and tomorrow? We’ve got you covered with these 10 things to know about money that will help you achieve your goals and build generational wealth!
1. Set your money values
These are about your relationship with money and will guide how you spend and save money throughout your life. For example:
- Spend less than you earn
- Live within your means - don’t overspend on a flashy lifestyle (cars, clothes and homes)
- Build generational wealth for you and your family
- Save for your goals
Without these values, you run the risk of spending on things that don’t matter or those that will get you into too much debt.
2. Set specific goals
Just a few! Setting too many can be overwhelming. These can be goals such as ‘always have an emergency fund’ or save for ‘holidays’ and ‘deposits for a home or car’. And don’t ignore retirement - think of retirement as saving for the days when you can no longer work. Make your goals specific: “I will save Rxx every month towards an emergency fund until I have saved Rxx”. This way you know exactly why you are saving, how much, and what you need to save to reach your goal.
3. Draw up a budget
List your income and your expenses such as housing costs, transport, food, clothes, data and airtime, entertainment, emergency fund and other savings and investments for your goals, any debt repayments such as student loans, and family commitments. Include a bit of extra in your budget for the unforeseen expenses - they will come up! Avoid spending too much on one item - especially if it is non-essential, such as 50% on clothes.
Make sure, 100% sure, that your income is equal to or ideally more than your expenses. This is the only way to avoid the debt trap, so cut back expenses or start a side-hustle if your expenses are more than your income. You can find good budget tips in Rate your budget to make sure it is meeting your needs.
Top tip: Make sure you understand your payslip so you know exactly how much will be paid into your account and which deductions have been made such as tax, UIF, retirement funding, group cover and medical aid. Chat to your HR team if you need help understanding your payslip.
4. Take your family commitments into account
It’s great to be able to give something back to your family, especially if they have made sacrifices for your education. Have a family meeting to discuss and agree on your financial contributions. You can find some good tips in Isn't it time you had a family meeting about money.
5. Protect your assets and your income
Now that you are earning an income, insure it, and any assets you acquire. Consider the following:
- Car and household insurance
- Life cover to ensure your family are taken care of if you are no longer around
- Income protection to ensure you have an income if you are temporarily disabled and unable to work
- Disability cover to replace your income if you are permanently disabled
- Health insurance - either medical aid or lower cost health care options if you can’t afford medical aid
6. Automate savings and investments, and insurance
Set up debit orders, preferably on your salary payment date, so your savings and investment contributions are automatically paid. This increases the chance of you reaching your saving goals because they are first thoughts not after thoughts!
7. Get a tax number
Register with SARS as a taxpayer to get a tax number, unless your employer does this for you, so you can submit tax returns and claim all the deductions you are allowed.
8. Be credit smart!
It is very easy to get into lots of debt very quickly. Becoming credit smart will help you avoid this!
- Check the repayment amounts before you take any credit and make sure you can afford them now, and if interest rates increase.
- Pay minimum amounts when they are due.
- Use short-term debt sparingly, such as credit cards, store cards, personal loans and overdrafts. Interest on these is usually over 15%, sometimes higher - it will eat into your budget.
- Monitor your credit score and credit report. Your credit report shows how you use credit, whether or not you are a good credit risk, and how much credit you have. Each time you take credit and pay an amount that is due, your credit record is updated. Your credit behaviour is given a credit score. A high credit score means you are a good credit risk, which means you can apply for credit at a lower interest rate. Check your credit score with credit bureaus - ClearScore, TransUnion and Experian, at least once a year.
- Don’t use all your available credit. Just because the bank or store have been generous and given you a substantial credit limit doesn’t mean you have to use it! Using too much could mean you are spending too much on repaying debt, leaving you with insufficient funds for essential items, including savings and investments!
9. Avoid scams
You do need to be careful, so don’t:
- Give anyone your pin
- Share any OTP with anyone, ever
- Give personal information, your pin or OTPs to anyone or in response to any SMS
- Respond to dodgy emails, including those telling you there is an inheritance in your name, you have won a lotto, or you should download or log in to a file to receive payment
- Log in or use an app using a link mailed, SMSd or WhatsApp’d to you. Use the official links only from app stores or company websites
And, when you are celebrating your first paycheck, don’t take pics or share any financial information on social media.
10. Improve your financial knowledge
Take a financial education course from Truth About Money so you can improve your financial literacy, learn more about savings and investment, and how to avoid the debt trap! The more you learn about money, the better you will be at managing it and creating generational wealth!
Managing money often turns out to be very stressful! It needn’t be. Start off with an idea of how you want to manage money, budget accordingly, be careful, and you will be able to live a good life – with very few financial worries!