Your first pay cheque – What now?
Starting a career means newfound independence, which brings with it all the ups and downs of adulthood: the ability to stand on your own two feet and the inevitable financial responsibilities of doing so. To start your career on the right financial track, Stanleur says you should get the basics right.
Understand your pay slip:
Where possible, find out what the difference will be between your gross and net pay. Gross is the amount you earn before deductions; net is the amount you take home after deductions. Deductions include:
- Unemployment Insurance Fund (UIF), which provides short-term relief in the event of unemployment or the inability to work. You contribute 1% of your remuneration and your employer matches this, making the total contribution 2%.
- Pay As Your Earn (PAYE): This is the tax you have to pay by law, according to what you earn.
Other benefits: Additional deductions could include medical aid, pension fund contributions, life cover and income protection, depending on your company’s offerings.
Be wise about other benefits:
Before you sign up for additional benefits, chat to a financial adviser so you can ask the human resources department the right questions.
- Does your employer offer life cover and will it cover pre-existing conditions you may have?
- Is there a company pension, provident or retirement annuity (RA) fund? How much can you contribute?
- Does the income protection benefit cover temporary disability only or is permanent disability also covered?Before you sign up for additional benefits, chat to a financial adviser so you can ask the human resources department the right questions.
It is important to determine if there are any gaps in the cover provided by your employer, to ensure that you make provision for these on your own.
Choose your medical scheme option and gap cover:
Choose a medical scheme option that’s appropriate for your needs, and check if your employer subsidises your contributions as part of your gross pay. Being a member of a medical scheme, however, does not guarantee that all your medical expenses will be covered when you are hospitalised. Gap cover may be necessary to pay for the shortfall between what the hospital and medical professionals charge while you are in hospital, and what your medical scheme pays for in-hospital procedures and certain out-patient services.
Draw up a budget that balances all your monthly expenses and savings against your net take-home pay. A new job usually comes with responsibilities and costs which you may not have incurred as a student, so it is important to prioritise your monthly expenses.
Invest in tomorrow:
Retirement may seem like a distant prospect, but the earlier you start saving, the better because you’ll benefit from the escalating effect of compound interest.
Get to grips with student loans and other debts:
Ensure that you incorporate your repayment plan into your budget and that it meets with the stipulations of your loan. Having a new job will make you a potentially attractive customer for loan providers. It is important to understand “good” and “bad” debt and try to avoid “bad” debt.
Manage your family’s expectations:
You may be expected provide financial assistance to close and extended family members. Exercise the discipline and build courage to say no when you can’t afford certain things, rather than compromising your financial security and credit record.