A Crash Course in Managing a Salary

Ah, the joys of starting your first real job. Work stretches infinitely into the future, the term ‘Friday night drinks’ takes on a whole new meaning and the money you earn is suddenly expected to cover, well… everything. Every. Single. Expense.

Sound scary? It doesn’t have to be.

Here’s a crash course in how to fend for yourself financially and make the most of that newfound wealth.

Form good money habits

Most people don’t have a mortgage to pay or mouths to feed when they first start work, so it’s easy to overspend on things like partying, eating out or a fancy new wardrobe.

But while it’s fun at the time, if you let these questionable money habits take hold they could come back to bite you down the track. So, tempting as it may be to go a little crazy, that first pay cheque is actually the perfect time to establish guidelines around how you spend your money.

For starters, why not squirrel away a bit of every pay packet from the get go? It might not seem like much now, but over time it will really add up.

And try to avoid bad debts like credit cards and personal loans, where high interest charges will eat away at your income over time.

Instead, learn how to budget and live within your means, and reap the financial and emotional benefits of being debt free.

Take smart risks

Plonking money in a savings account earning a bit of interest is fine as far as it goes, but over time inflation will erode the real value of your cash so you need to try and maximise returns to stay ahead.

That’s not to say sell everything and put the proceeds on red, but with time on your side your first job is a great opportunity to make long-term investments and ride out short-term ups and downs.

For example, in the thirty years from 1983 to 2013, despite a few scares along the way, the Australian share market returned on average around 11 percent per year with dividends reinvested, which is real wealth creation.

There are simple things you can do to get some skin in the game, like choosing the investment option on your super or buying a couple of blue chip shares. But investing can be a complex business, so if you’re unsure it’s best to chat to a financial adviser.

Take control

Are you the type of person who doesn’t know how many super accounts they have or what super even is? Do you think that insurance is just for old people and investing is for guys in pinstripe suits?

Like it or not, money makes the world go round and it helps to have a grasp on what’s going on. So don’t be a financial fool; take an interest, learn from the experts and take control of your money. It will pay off in the long-run.

Image courtesy Jeff Kubina, via Flickr