How to navigate your finances after landing your first job

Poole Finances

Getting your first professional job is an exciting milestone. Not only are you about to start a long and (hopefully) successful career, but you’re also about to earn more money than you ever have.

Learning how to manage your finances from the early stages of your career will set you up for success, rather than decades of struggling with debt. As expert  financial planners, we’ve put together a short and easy overview of how to manage your finances after landing your first job.


How to set up a realistic budget

If you want to set yourself up for financial success, starting a budget is an absolute must. As corny as it sounds, a budget is like the compass that keeps you on the right financial path.

Your budget doesn’t have to include complex formulas or 12 different spreadsheets. Simply tracking your income and expenses can increase your financial awareness, help you manage debt and boost your chances of achieving your savings goals.

Here are some tips on how to set up a budget:

1. Track your income

Start by determining your monthly income after taxes. This is the money you have available to allocate to various expenses and savings goals.

2. List your expenses

Make a list of everything you spend money on. Categorise the expenses into fixed expenses (things that are the same every month, such as rent, loan repayments, utilities or insurance) and variable expenses (things that change from month to month, such as groceries, dining out or entertainment). Don’t forget to include any money you want to save – whether that be for a house, car, or holiday – as an expense.

3. Differentiate between needs and wants

If your expenses exceed your income, you’ll need to eliminate some of them. Review your list and distinguish between essential needs (things such as groceries) and discretionary wants (entertainment, for example). Needs should take precedence in your budget, while wants can be allocated a portion of your remaining funds.

4. Monitor and adjust

Regularly review your budget to track your progress and make updates when things change. You can use tools like budgeting apps, or a Microsoft Excel spreadsheet, to stay organised. If you find you’re consistently overspending in certain categories, adjust your budget accordingly.


It’s time to start thinking about superannuation too

Superannuation, often referred to as “super,” is a long-term savings plan designed to provide for your retirement. It’s like a financial time capsule that grows while you work, ensuring you have money to support your lifestyle when you eventually stop working.

A portion of your salary (for most people this will be 11%), is set aside and invested in a superannuation fund by your employer. Over time, these contributions grow through investments, such as stocks and bonds, helping your retirement savings increase steadily. The money in your superannuation account is not just for your golden years; it can also be used in case of disability or illness.

The earlier you start contributing to your super, the more you’ll have when you retire. Here’s why it’s crucial to think about it now, even in your early career stages:

  • Compound growth: super benefits from the magic of compound interest. The longer your money is invested, the more it can grow over time. Starting early gives your investments more time to flourish.
  • Tax advantages: contributions made by your employer to your super are taxed at 15%, which is a lower rate than what most people’s regular income is taxed at. This means you get to keep more of your hard-earned money from super contributions that you make from your income.

Security in retirement: superannuation is your financial safety net for the future. It ensures you have enough funds to maintain your desired lifestyle when you retire, so you can relax and enjoy life without financial worries.

Student debt - navigating your finances

The smart way to navigate your student debt

Student loans enable you to obtain a higher education without the need to pay upfront. But they also come with the burden of debt – a debt you may be required to start paying back now you have your first job.

In Australia, the government offers a helping hand to students with the Higher Education Loan Program (HELP), which includes HECS-HELP and FEE-HELP schemes. Instead of having to pay interest on your student debt, as you would other debt such as a car loan, you simply pay back the amount you borrowed after it’s been adjusted for inflation.

One of the perks of a student loan is the income-contingent repayment system. You only start repaying when your income surpasses $51,550. This means you won’t be burdened with repayments if your taxable income is below that amount.

If your finances allow, you may want to consider making extra repayments to pay down your student debt more quickly. However, many people prefer not to do this because they aren’t required to pay interest on the loan. Instead, they choose to use their money in other ways, whether that be saving for a house or investing.

Ultimately, whether you decide to make additional payments towards your debt is a personal decision that should be discussed with a financial advisor.


Why right now is the best time to start saving

When you get your first job, the first thought that comes to mind probably isn’t, “Wow, I’m going to save so much money!”

However, right now is the crucial time to start saving for your future. Saving provides a safety net for unexpected expenses, helps you achieve your goals and ensures you don’t run into financial hardship.

Here’s why it’s crucial:

  1. Financial security: saving ensures you’re prepared for life’s surprises, like medical bills or car repairs, without going into debt.
  2. Goal achievement: it empowers you to reach your dreams, whether it’s buying a home, taking regular holidays, or retiring comfortably.
  3. Compound growth: the earlier you start saving, the more your money can grow through compound interest.


A simple way to save for your future

The best way to start saving is to make it a non-negotiable part of your budget. In other words, include savings as a “need” in your budget rather than a “want.”

Keeping a separate savings account will go a long way in helping you stay within your budget too. You can use this account to set aside funds for special occasions, future goals and emergency expenses.

It’s best if you aim to save a specific portion of your income each month, even if it’s a small amount. It might not seem like much now, but over time this disciplined approach can lead to substantial savings.

A good rule of thumb to begin with is 10% of your after-tax earnings. However, you may also want to talk with a financial planner to get more personalised advice on your personal circumstances. Doing so will equip you with the necessary information and help you build smart financial habits from the outset, setting you up for future success.

For more information on how Poole Advisory can help you stay on top of your budget and improve your overall financial situation, get in touch today or book an appointment.


Compliance Disclaimer:

This information contains general advice only, that is, advice which does not take into account your needs, objectives, or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial or credit advice that addresses your specific needs and situation before making investment or borrowing decisions. Taxation information is based on our interpretation of the relevant laws as at 1 July 2018. While every care has been taken in the preparation of this information, Prosperitas Partners Pty Ltd does not guarantee the accuracy or completeness of the information. The case studies are hypothetical, for illustration purposes only and are not based on actual returns

Poole Advisory Pty Ltd ABN 15 642 040 604 is a Corporate Authorised Representative (No. 001282603) of Prosperitas Partners Pty Ltd ABN 30 662 654 453 AFSL 544 917

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