As you step into the professional world, establishing healthy financial habits early could mean the difference between living paycheck-to-paycheck and achieving your financial goals.

A regular full-time salary can open up a whole new world of spending. From hobby splurges to ‘big ticket items’, like holidays, a car, and even your first mortgage – if you can avoid hazards like poor budgeting and bad debts along the way.

We’ve put together some steps to help you navigate the maze of financial decisions that come with your first job, focusing on practical steps to save money and build a stable financial foundation.

Understand your paycheque

Before you start planning your budget, it's important to understand the distinction between gross and net pay. Your gross pay is the total amount you earn before deductions, and includes taxes and superannuation (super). Net pay, on the other hand, is what you take home after these deductions.

For example, the average entry level salary in Australia is $65,000 gross. After tax, that’s about $52,000 a year, or $1,000 a week. If you have a HELP or HECS loan, your net pay will be less than that. You can use the BCU income tax calculator to help understand the difference between your gross and net take home pay.

Give yourself a reality check

Now that you know your net pay, it's time for a reality check. Create a comprehensive budget that includes all your monthly expenses – rent, utilities, groceries, transportation, entertainment, and subscriptions. We know it can be a daunting, but the foundation of a good budget is transparency, so factor in everything from your morning coffee to your streaming services.

You could use Your Financial Wellness to help map out your expenses to get a clear picture of how much you have left after covering the essentials.

Be realistic and honest with yourself during this process. Your leftover money after expenses is yours to be spent, saved, or a bit of both – that’s where opportunity lies.

Know your debts

Credit cards and 'Buy Now, Pay Later' (BNPL) services can be double-edged swords. While they offer convenience, relying on them could lead to a debt spiral. Understand the terms and condition, interest rates, and potential fees associated with these financial tools – and try not to succumb to the allure of instant gratification. If you can’t afford it out of your savings or splurge for the budget period, the reality is that you may not be able to afford it. We know that can be a bitter pill to swallow, but it’s better than learning the hard way.

Splurge smarter

Having your whole paycheck land in your bank account can make you feel rich. It’s a big dollar figure with no context in relation to where the money needs to go. You might understand from your budget that about half is for rent and bills, but with bills coming out at various times, it’s hard to keep track of the real amount you have left for spending.

To avoid being left in the negative or missing a bill payment, set up a separate transaction account for your spending or splurge cash that you’ve identified in your budget. That way you know your real balance for the pay period. The mymo by BCU app can help you to keep track of your bills and give you a heads up if you don’t have enough money in your account to cover them – you’ll also avoid any late fees.

Pay yourself first

Similarly, if you leave your savings in your everyday transaction account, you’re more likely to see it as ‘cash to spend’. Your dedicated savings account should be treated as a sacred space for your savings, and the strategy is simple: pay yourself first. Allocate a fixed percentage of your income directly into this account before you even think about spending money on other things. The higher interest rate will help your savings grow faster, and you'll be less tempted to dip into it for impulse purchases.

If you’re on a roll with your savings, or have an ambitious goal you want to supercharge, you could also consider a term deposit. Term deposits usually offer higher interest rates because you commit to keeping your money deposited for a specific period. When you open a term deposit account, you agree to deposit a specific amount of money for a fixed period, ranging from a few months to several years. Unlike regular savings accounts, term deposit accounts often have restrictions on withdrawing funds before the maturity date, so carefully consider when you need to use the money.

Give yourself a safety net

Emergencies happen. Having a financial safety net could help prevent small hiccups from turning into financial disasters. You can start building an emergency fund by setting aside a portion of your income each month. By aiming for at least three to six months' worth of living expenses, you can create a cushion for unexpected expenses like medical bills, car repairs, or sudden job loss. This can sit in your higher-interest savings account to ensure your money is working for you.

Maximise your super

Superannuation is a long-term investment in your future. While retirement may seem distant, contributing extra funds to your super account early on could have a substantial impact over time. Understand your employer's super contributions, consider making voluntary contributions, and explore investment options that align with your long-term financial goals.

Basic account structure

If you follow the above tips, your bank account structure should look something like this:

  1. Everyday transaction accounts – this is where your pay is deposited, and your bills come out of.
  2. Splurge transaction account – this is where you allocate a portion of your salary for coffee, eating out, and other random activities in the pay period.
  3. Savings account – you can have one, or many (just make sure there aren’t account fees if you’re opening up more than one savings account). This is where your emergency fund goes, as well as anything you’re saving for.

The transition from student life to the workforce is an exciting time bringing a newfound sense of independence and financial responsibility. By understanding the nuances of your paycheck, creating a realistic budget, and adopting disciplined financial habits, you can set the stage for a secure financial future.

Resist the urge to splurge, be mindful of credit card usage, and prioritise saving for both short-term goals and long-term security. Your financial wellbeing is a journey, and the decisions you make today will shape your tomorrow.

Important information

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