It’s an exciting time when you first enter the workforce. All of a sudden you have your own money and retirement seems like a lifetime away. It is a time to enjoy your new found financial independence, however there are a few steps you can take early in your career which will enable you to enjoy greater financial independence across all your various life stages. Below are my top 5 tips when you enter the workforce.
Case study: Kate @ 19 years Initial investment $1,000 Starts a regular savings plan $30 per week Kate @ 25 years $10,000 Kate @ 30 years $20,000
*Assumes: Initial Investment $1,000 Annual return (after fees) 7.7% Rate of inflation of 3%
2. Check your superannuation and your insurance: When you start working your employer must contribute 9.25% of your earnings for ordinary hours of work into a super fund if you are either full time, part time, casually or as a contractor who is employed wholly or principally for labour. Check your annual statement, this will start you on the road to getting a clear picture of what you have, what dollar amount is contributing to superannuation each year and help you plan for a secure future. Most superannuation funds offer insurance – think about what you need and check what you can insure yourself for through your superannuation fund)
3. Set Financial Goals – set financial goals early, do you want to save for a deposit on a house? Save to enable time out of the workforce? Start a business? School fees? A great holiday? Whatever it may be it helps to think about your financial goals early, particularly if you are planning on taking time out of the workforce. Spend time on this, make sure your financial goals are in line with your broader values and write them down! Your goals are the starting point to a strategy and that strategy helps ensure a secure financial future.
4. Use online tools and calculators – online tools and calculators have improved substantially over the past five years. There are simple tools and calculators you can use to give you a great starting point for enabling those goals and objectives you have set. It also helps identify any gaps you have in your expectations and your current financial situation. Jacqui is 25 years old and unsure where her money was going. She knew she wanted to take control, however didn’t know where to start – she used the budget planner https://www.colonialfirststate.com.au/firstnet/FNA/calculators/budget-planner/ and identified where she could cut costs. “The process helped me identify where I waste money, however it was more positive than that – I realised that by cutting down some non essential spending, I was able to save an additional $400 a month. I set up a savings plan straight away!”
5. Find a money mentor – it goes without saying that some people are better with money than others. Unfortunately talking about money is something that many women find inappropriate and uncomfortable. However, talking about money is essential. As the saying goes, you don’t know what you don’t know. I thought I was pretty good on the money front until I started talking about it with a girlfriend over dinner. While I understood investments and investment markets, this girlfriend understood budgeting, a skill I sorely lacked at the time! Instead of letting pride get in the way (I was the one who worked in finance after all), I decided to pick her brain as to some of the strategies she employs with regards to budgeting – it was a conversation worth having. As a result of the conversation and her tips all those years ago, I had more money to do what I love with money – investing.
Here is what I learnt from my budgeting money mentor – Beth.
1) Give yourself a target for saving every six months
2) Try and delay your big purchases for a few extra months to achieve the six month plan – for example, you may want to buy a new car, even though you decide in April and can afford it, try and hold off a few months – this will help you achieve your six month plan.
3) Contain your large spending items to certain times of the year (i.e. do a big spend only once a year) – this helps you keep control.
4) Set the credit card to automatically pay after the 45 days free period, so no interest is charged
5) With this set up, you can use the credit card to extend your savings
6) And the big one – my favourite – when you get an increase at work or a bonus, just continue your spending life as normal. If you have allowed yourself the one big spend a year, additional money will hit your savings – not the shops.
So where do you need help? For me it was budgeting and keeping control, for you maybe it’s how to start investing or planning for a career break. It doesn’t matter what it is, find someone who does it well, buy them a coffee and pick
you won’t regret it.
This document has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. ‘Count’ and Count Wealth Accountants® are trading names of Count. Count is a Professional Partner of the Financial Planning Association of Australia Limited. Count advisers are authorised representatives of Count. Information in this document is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document. This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.