Ask Paul: My income went up $10k but I can't stop spending every cent
I am 43 and have just started my dream job with a major newspaper.
My problem is that I'm earning $10,000 more than I did in my last job, yet I still manage to spend every cent.
I never pay a bill late, and put a bit extra into my mortgage, but most of my money is frittered away on little things.
I've never invested in shares, and am keen to, but I wouldn't know where to begin.
What would you recommend as the best way to get ahead, start investing and build up my savings? - Paula
Big congratulations, Paula. I am delighted for you that you have found your dream job. We spend enough time working, so we really should enjoy it!
The first challenge for you, though, is not investing; it is behavioural change. My suspicion is that budgets only work for the truly disciplined, which is not me and possibly not you.
How about you try this? Each pay day put, say, 10% immediately into a separate account. Then spend the 90% left over as you like. But you can't touch the 10%. This is called "pay yourself first".
Once you do that for a few months, your behaviour will change to adapt to your new income. You will have some short-term pain.
Once you know you can sustain this, then I'd look at a low-cost indexed share fund. There are quite a few about - Vanguard and BlackRock are large in this area.
If your income is above $37,000, I would suggest that topping up your super via salary sacrifice is an even better idea.
You get a tax break here as well. Super fund returns have been very good and you can't touch the money until you get into your 60s.
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