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Suddenly, you have wages

2 August

Posted by Tom Hartmann in Budgeting, Kiwisaver, Money tips, Planning, Saving | 0 comments

Recently the Listener pointed out the plight of Kiwi graduates and their “gloomy” employment choices as they set out into the job market. Perhaps you’ve experienced this first-hand, picking up work wherever you can. If the job’s not quite right, at least it’s right now, and getting started can get some momentum going.

Whether you’ve accepted the first thing you could find or landed your dream job straight away, you now have pay to play with. And with it come key decisions to make that can make a big impact on your future. That’s where Sorted can help.

Take the time to dream – a new job is an exciting chapter beginning – and think about where you would like to be financially in the short, medium and long term. For example, in the short term you can save an emergency fund (three months’ expenses); in the medium term you could save for a car; and in the long-term, although it might seem an eternity away, you can put money away for retirement (the sooner you start, the sooner you can finish working!).

So set some realistic goals – here’s our handy goals worksheet – then roll up your sleeves and use your money smarts to reach them.

Start by figuring out your take-home pay. Despite it being apparently clear what your starting salary will be for a given position, it can be a bit of a mystery exactly how much you’ll be actually bringing in the door.

You may be starting to chip away your student loan, so there will be salary deductions for that. Then there will be pay-as-you-earn tax (PAYE) on your wages. And unless you have opted out, you will have been enrolled with a default KiwiSaver provider so you can save for retirement or a first home. (Here’s where to go for help with your KiwiSaver decisions.)

Once you’ve figured out your incomings, it’s time for your outgoings. You need to spend less than you earn – and make sure your hard-earned cash is going where you want it to (not where every marketer in the world wants you to be spending!) In short, you need a money plan, and there is no better tool than Sorted’s money planner.

As you make a plan for your money, hunt down any money left over that you might have in your budget (your surplus). Then, pay yourself first: automatically put that portion of your pay cheque to a savings account earning you interest (there are heaps of accounts out there called ‘savings accounts’ that don’t really help you at all). Get into the savings habit, and you won’t even miss the money as your wages roll in.

Next up, it’s time to get serious about shrinking debt, especially any dumb debt that you may have found your way into.

Your student loan however, is not dumb at all, since it’s interest free (unless you move overseas). So it’s a lower priority than debt that is charging you high interest. Over time, inflation will eat away at your student loan and lower it; interest on dumb debt, however, will continue spiralling upward until it’s out of control.

Here’s to all those new to our significantly challenged job market. If you are still looking, hang in there! And if you have recently landed – whether the job is right for you or just right now – may the decisions you make stretch your pay as far as you need it to.

What have you found that works when you have a new salary? 

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