Picture this: it’s Friday afternoon, you’re watching the clock because you know you get to knock off early today. You’re feeling tired after a long working week. The anticipation of getting your foot out the door is becoming unbearable. Just then, an email pops up. It’s your payslip. You're first in this new job. Now, your mind fills with ideas of what you are going to buy. Perhaps you put fuel in the car. Maybe you’ll buy those sunglasses you’ve been eyeing off. Or, your first stop is the bottle shop for your after-work drinks.
We’ve all been there. The temptation to splurge with your first regular paycheque is almost like a rite-of-passage for those who enter the full-time workforce. But, it’s a trap. It never ends with one paycheque, because the security of a regular income quickly becomes a bargaining chip used to argue with yourself. Your inner monologue begins with, “Oh, just this once” or, “I deserve this” or, “I’ll pay it back with next week’s pay.” Pretty soon, those bargains you’ve made with yourself turn into habits and before you know it you’ve accrued debt you are struggling to pay for, or you run out of money days before every payday.
It may not sound sexy, but forming good spending habits and monitoring what’s going in and out of your bank account is essential to your long-term financial freedom. Because, pretty soon, you’ll want to spend your good income on buying a car or a holiday or even a house. So, shaping those bad spending habits into good ones is a task best done from the first paycheque, and here’s how.
Understand Your Tax and Superannuation Obligations
The first $18,200 you earn are tax-free. But remember, this is on all income earned, including money gained from a hobby business and the interest accrued on your bank accounts. To avoid any traps, it is best to link your bank account with your tax file number, so that when it is tax time, all that information will be readily available for your tax agent.
If you are employed in the public sector, your employer will automatically deduct and pay your superannuation into your fund. However, if you are a sole trader it is up to you to ensure you pay into your superannuation. The Australian Tax Office also provides deductions for voluntary contributions to superannuation accounts as an enticement for Australians to invest in super. Making extra voluntary payments into your super may not seem important if you are in your 20s however think of it like any other long-term saving goal and ask yourself, ‘do you want to enjoy retirement or just exist?’ Too many people get to retirement age, and simply don’t have enough super – they can barely pay for basic expenses such as food, electricity, and insurance. Yet all it takes is a very small personal contribution into your super from early in your working career, and the compounding interest effect will significantly boost your super so you will be able to have a very comfortable retirement!!
Set up a Savings Goal
As we said, we have been there. We understand how hard it is to resist the temptation to spend your new shiny paycheque. So, we recommend setting up a separate savings account. One hard to get access to, and not attached to a card. As you watch your savings increase, it will help you build motivation to save for the bigger items and it will set you up for great spending and savings habits when you eventually have a mortgage or other big commitments.
At Premier Spending Planners, we take pleasure in helping our clients set themselves up for financial freedom. Our forecast software is easy to use and guaranteed to get you excited about saving. So if you are in the fortunate position of having just acquired a new job and don’t want to fall into bad spending habits which can lead to excessive debt from buying too many ‘toys’, contact us today to get started.
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Get Started With a Spending Plan Today, so You can Avoid The Wage Trap!