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How to build your wealth from your first payday

If you start saving at the start of your career, you can reach your financial goals and enjoy your life on a monthly salary. A personal finance expert explains how.

11 June 2024 · Helen Ueckermann

How to build your wealth from your first payday

If you’ve just landed your first job, you may wonder how best to manage your earnings. Spending it all on luxuries may be tempting, but the wiser choice is to make your salary work to your long-term advantage.

Nico van Gijsen, a registered financial adviser and managing director of Finlac, offers some guidelines.

Tip: Want to take control of your finances? Start by checking your credit score.

Put your money to work

You don’t create wealth by spending on clothes, watches, cars, or any other items that may impress others, Van Gijsen notes. Rather, he says, you should use it to buy “two scarce commodities in today’s life – freedom of choice, and time”.

He recommends asking yourself what use money is, if you spend all your waking hours making it, but have no time to enjoy it.

“Wealth is created by making your money work for you,” he emphasises.

“The one thing to do when you start earning is to pay yourself first. This means, when you budget, allocate part of your income to savings and investments.”  

Save a fixed amount monthly

Make sure you save enough money every month. Allocating 20% of your salary is “a reasonable starting amount”, Van Gijsen says.

“More is better, but you’re only young once and must have some fun,” he notes. “If you work for a good company, you should contribute around 15% of your income to your employer’s pension fund.”

You only have to save another 5% of your income to get to the suggested 20%, he adds. “On a salary of R20,000, this is R1,000 per month.”

A savings scenario

Based on the above example of a pension fund contribution of 15%, and saving of 5% of a R20,000 salary, Van Gijsen outlines the following savings scenario.

Let’s assume:

  • Youre disciplined, don’t touch your retirement fund, and save 5% of your salary for your entire career (say 40 years)
  • Your salary increase is 5% per year
  • Your pension grows by 10% per year

You can expect to have an investment of:

  • R88,239 after five years
  • R254,739 after ten years
  • R554,020 after 15 years
  • R1,075,740 after 20 years, and
  • R30,277,163 after 40 years

Get expert advice

To develop your lifelong financial plan, get help from an independent, certified financial planner, advises Van Gijsen.

“Don’t wait ten years,” he cautions. “Remember, ‘time makes rich’!”

Tip: Learn how savings and investments are essential for your future financial wellbeing.

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