How should I manage my first grown-up salary?


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Isabelle: I recently moved into my first full-time job post-graduation and would like some guidance on how to best deal with my sudden increase in pay.

It is a bit overwhelming and I am not sure I am doing the best with what I have.

I'm 21 and earning about $67,000 a year after finishing university in June. I have no debt besides my HECS-HELP from university. This is about $27,000 and is slightly more than average due to some time spent on student exchange in Asia.

I recently moved closer to my workplace and pay about $180 a week as I rent with housemates.

Traditionally I have placed my earnings into my bank account and tend to set aside $200 a month into an online savings account - this is sitting at about $5000 now.

I am considering if I should increase this monthly amount in line with the new earnings or invest elsewhere.

I would like to avoid wasting too much of my income on leisure activities such as restaurant meals etc. Do you think I should focus on paying off my university debt or consider other options?

Paul: Hi Isabelle. I remember my first "real" job in investment research.

I went from $66 a week serving beer to nearly $300 a week.

In those days we got cash in a paper envelope. I stuffed it in my wallet and literally could not spend it.

I really do not want you to pay off your uni debt. In effect, it is an interest-free loan. Use your money elsewhere.

The debt will be paid back as you are earning above the $54,869 threshold and on your salary you will pay about 4.5% of the amount above this.

I am delighted you are saving $200 a month into your online saver.

My advice is to keep this up and add to it as you can. You are young, you may want to travel, do further study and I think the flexibility of cash is terrific.

You may want to study up on investing in shares (try the ASX free online courses) and you may choose to invest some of your savings this way.

In the long term a property may become an option you wish to pursue but right now I lean towards saving, not spending, and learning to invest.

Above all, don't be overwhelmed. You are doing exactly the right thing at this stage in your life.

Ask Paul Clitheroe

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
December 8, 2016 5.50am

Just want to say thank you to Paul. It was around 1997, on TV was a money show with Paul, I used to like that show every week. I started to invest in the stock market on Paul's directives, and a deal regarding to buy land lease, csr, and nmt, plus another share, I don't remember what it was, it was four stock with $2000. After a few yrs,three stocks went down and one went up. I wasn't very happy about that, losing $1500 in a few months.
But I had reinvested my $800 in an other stock, which I was lucky as that stock went up and up and up.
Sold that stock and reinvested in others and so on and on. Now in 2016, my portfolio is more than $100000.
If it wasn't for Paul, on that Money show, I wouldn't have succeeded the way I did.
Thank you again Paul, you have been an inspiration for me.

Amber Cameron
December 11, 2016 11.09am

Hi Isabelle, congratulations! I do think that $200 per month saving is too low given that you don't have other debts. I'm in the exact same position as you (similar salary, same rent!) and save over $2000 per month. Best wishes, Amber.