Just Landed Your First Job? Here’s The Money Advice You Need to Hear Now
So, you landed your first job. Congratulations! Before your first paycheck hits your bank account, it’s time to brush up on some basic money advice so you can make the most of your newfound income.
Do you work for the money, or will your money work for you? While some young people are lucky enough to get sound financial advice from a family member, many young workers could use some smart ways to manage money, stay out of debt, and hit financial goals sooner.
Get Your Pay Right
This is a major one for every new job, but for your first job it’s especially important to make sure you’re getting paid the right amount, for the right kind of work, and that you’re being taxed the right amount. There are four different kinds of employment in Australia:
Your contract should clearly state which kind of employment terms you will be working under and how much you will be paid.
All employers are required to give their workers a payslip. Most these days send these via email or an online platform, and some still use paper. Stash these away somewhere safe, like a folder in your documents or a safe place in your house.
Payslips should always include the following information:
- Hours worked
- Rate of pay for each hour worked
- How much money went into your super fund
- How much money (if any) was taken out for tax
Tax Is Not A Dirty Word
Your employer will ask you for a Tax File Number (TFN) which you can easily get at an Australia Post office, at Centrelink offices, or through the mail. See the Australian Tax Office for more information on getting your TFN sorted.
Tax time for many can mean tax return time, which is where the government gives you a part of money back. Tax will usually be taken out of your pay automatically, and if you earn under a certain amount each year you’ll get some of it back.
When you lodge a tax return through the Australian Taxation Office, you can sometimes claim work-related expenses as deductions. You’ll need a receipt, and the expense will need to be directly related to work, such as a mandatory uniform, specific travel expenses, and tools you may need. Mind you, this only applies if you’ve paid out of your own pocket. If your employer has already reimbursed you, you can’t claim it again.
If you’re working as an independent contractor, you may be able to claim even more deductions. Read up on what you can claim here.
Boss Your Budget
We all need a budget. But not all of us were cut out for tracking our spending or using spreadsheets.
Okay, but stay with me. It can actually be easy, and require hardly any work from you once you’ve set it up. What your exact setup looks like will depend on your living situation, how much you’re earning and what kind of expenses you’ve got, but the principle remains the same – pay your bills and savings automatically, before you spend on anything else.
If you’re like a lot of people (myself included), actually sticking to a traditional budget is unrealistic. Stuff happens! Unexpected expenses pop up! Or maybe you splurge too much on a night out with friends. Whatever the reason, making the decision to put money away is hard. So don’t do it – let technology do the work for you. The best part of automation that you don’t have to think too much about it. It’s like you’ve put your good behaviours, like saving money for the future, on autopilot. They just happen like clockwork each month, without you having to decide to do them each time.
Part-time & living at home
THE SIMPLE 80/20 METHOD
If you’re living with your parents and perhaps working part-time, you probably want to save a bit of money from your paycheck. Perhaps you’d like to have a gap-year fund for a trip overseas, or you’re keen to get started on a house deposit, or even just save up for a swish jacket. Easy peasy, just set up an automatic payday transfer into a savings account. Make it 20% of what you earn, or whatever amount floats your particular boat and leaves you with enough leftover to live your life.
Your budget is done!
THE FANCIER 60/20/20 METHOD
For those living out of home, who must factor in living expenses as well as disposable income and saving, the 60-20-20 plan is dead easy. It takes the stress out of balancing necessities and discretionary spending.
So what is the 60/20/20 budget method? The idea is that 60% of your income goes toward necessities (groceries, utilities, transport, bills), 20% goes into saving for the future (or paying down debt, if you have it), and 20% is yours to spend on whatever makes you smile (holidays, new shoes, going out for dinner).
In the personal finance world, there are a bunch of variations on this strategy to suit your situation. Let’s start with the basic steps you need to get started, and you can change it up as you like.
Find Your Real Pay Amount
Take a look at your first paycheck, what you take home after tax. This is your take-home income – but that doesn’t mean it’s all yours to spend.
Set all your bills to auto-pay (eg. BPAY or Direct Debit) on payday, or one day after if your employer sometimes puts pay through late. This includes rent, phone bills, gym memberships, etc
Managing debts has to happen before saving. Maybe you have student loans that will need repaying, or a credit card debt. Start with the small debts and move to the bigger ones. Set up an automatic payment from your main account on payday. The amount should be 20% of your take-home pay.
No Debts? Then Save
Or, if you don’t have any credit card debt or student loan left, it’s time to put that 20% toward your long-term financial goals. Set up a new savings account with your current bank. Call it ‘Savings’. Then create an automatic transfer, set for every payday, into the ‘Savings’ account. The amount should be 20% of your take-home income.
Create another automatic transfer for 20% into a new everyday account. Call the account ‘Splurge’. This will be your pocket money, if you will – your fun fund. It’s for things like going out for dinners and new shoes – or whatever it is that will make you happy – guilt free! So you’ll be saving and splurging at the same time.
And The Rest
The amount that is left over in your main account, after bills, will cover your living expenses until next payday.
This method works like a charm for some, but if you find doesn’t fit with your life, YNAB (You Need a Budget) is another worthwhile method for managing your money. Their website has great classes to get you up and running.
Get Super Smart
If you’re earning more than $450/pcm, your employer must pay 9.5% of what you earn during normal hours into your superannuation fund (not including overtime). If you’re under 18, you must also be working more than 30 hours per week.
The decisions you make now will affect your super balance dramatically by the time you’re ready to retire. Small amounts now will earn compound interest over decades – which basically means that the original amount earns interest, and then the interest itself earns interest… like magic!
Choose a super fund with low fees. Super funds can be very different in terms of fees and investments, so it’s wise to compare options. Websites like Choice can help to educate yourself about the best options.
Make sure your super is all in one account, not spread out. Multiple accounts mean multiple fees, which can drain your funds! If you’ve worked a few part-time jobs, your employers may have set up a new account for you each time. The simplest way to roll them all into one is to set up a new account. If you give the super fund permission, they will find all your missing super and combine it. You might have more than you thought.
Now that you’ve lined up your finances like a pro, feel free to go and buy a round of drinks for your mates. From the splurge fund, of course.
And pat yourself on the back a little bit, if you like. After all, you just got a new job… and you’re on the path to financial success.
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