Its the beginning of new year which means that kids could be preparing to go back to school while some people are getting ready to go back to the office after a holiday.
The start of 2024 could also mean the start of a new journey for young people as they start their first jobs after completing their studies.
Charnel Collins, CEO at National Debt Advisors said that earning your first salary is a memorable and exciting time, but without proper financial management it can also easily run out before you receive your next paycheck.
Here’s a look at what you should be doing with your first salary:
Start a budget
Drawing up a budget is the first thing that you should be doing before you start paying off your bills or buying groceries for your home. If you are having trouble with getting started on your budget then you can use these budgeting methods to make the process easier.
70/20/10
With this budgeting method, you need to separate your salary into three groups where:
– 70 percent of your income goes to living expenses.
– 20 percent to debt payments.
– 10 percent to savings.
80/20
Another budgeting method is the 80/20 method, where you separate your salary into two separate groups. People need to separate:
– 80 percent of your income for needs, wants and debts
– 20 percent is strictly allocated for savings.
50/30/20
Like the 70/20/10 method, you need to divide your salary into three categories. With this method, you can put away
– 50 percent of your salary to needs like rent, groceries, and utilities.
– 30 percent to wants such as hobbies, holidays, and eating out.
– 20 percent to your savings.
Put some money aside in an emergency fund
Having some money set aside in an emergency fund for unexpected situations will leave you in a better position than if you had to get in to debt by borrowing cash when you need it.
Tyrone Lowther, head of Budget Insurance, recommends that you have three to six months’ worth of expenses saved up in your emergency fund.
“Start by saving a small amount each month. Commit – don’t withdraw anything from this fund unless it’s a crisis.”
Savings fund
Start your savings fund by having a goal in mind. You can choose to have a long-term savings goal, a short-term savings goal, or both. An example of a long-term savings goal is a down payment on a house or a car, while a short-term savings goal could be a holiday for your birthday or new furniture for your home.
Having a goal in mind will help you stick to the process of saving and keep you motivated to put some money away every month until you reach your savings goal.
Get help
People can feel overwhelmed when they receive their first salary because they are unsure about what they should be doing with the money. This is the reason that they should be speaking to a financial adviser.
A financial adviser can steer you to wealth, and help you make the best investments decisions so you can become financially stable in life.
An adviser can offer you guidance on how to invest your money, they can offer you advice on your long-term investments and finally they can help you get the best possible retirement saving strategy to secure your financial future.
Income protection
According to Janine Horn, financial adviser at Momentum, whether you are a full-time worker, part-time worker, business owner or entrepreneur, income protection is necessary to help people protect their ability to earn an income.
With income disability protection, your income is assured if for some reason you are unable to work.
“Income protection can be up to 75% of your net income and you are protected up to age 70 and sometimes for the rest of your life,” Horn said.
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