Embarking on your financial journey as an intern can be daunting, especially when your income is tight. But laying the foundation for strong financial habits early on can pave the way for long-term success, no matter where you are in your career. Whether you're navigating your first job or stepping into a new promotion, strategic financial planning is essential for achieving stability and growth. In this article, Tebogo Kereng, trainee financial planner at BDO Wealth, shares expert insights on how to manage your finances effectively—from your internship through to your career advancements.
Financial planning as an intern
1. Track your expenses:
When your income is small, it’s essential to know exactly where every rand goes. Tracking expenses helps you identify where you might be overspending and allows you to adjust accordingly. You can use apps, a spreadsheet, or bank statements to monitor spending. Differentiate between your needs (like rent and groceries) and wants (like entertainment), and cut back on non-essentials.
2. Reduce utility costs:
Utility bills, especially electricity, can eat into your budget. Eskom offers a Free Basic Electricity (FBE) program for low-income households, providing a limited amount of free electricity. Check with your municipality to see if you qualify, and take other small steps like switching off lights or using energy-efficient devices to reduce costs.
3. Avoid unnecessary debt:
It’s tempting to take on debt for items like cell phones or clothing, but if these purchases stretch your finances, they’re not worth it. Always evaluate whether you can truly afford something based on your current financial situation—if your essentials and savings goals are covered, you may be able to afford a non-essential item.
4. start an emergency fund:
Even if your income is small, putting aside a bit each month will eventually add up. Aim for an emergency fund that covers two to six months’ worth of expenses. This will help protect you against unexpected financial hardships.
By starting with these basics as an intern, you lay a strong foundation for future financial security.
Financial planning after a promotion
Once you’re promoted and your income increases, you have an opportunity to refine your financial plan and secure long-term stability. Marichén Erasmus, CFP®, Financial Planner, BDO Wealth, Cape Town, says to focus on the following:
1. Adjust your budget:
When your salary increases, revisit your budget. It’s easy to fall into the trap of lifestyle inflation, where you spend more because you earn more. Instead, keep lifestyle expenses in check and allocate the extra income toward savings, debt repayment, or investments.
2. Increase your emergency fund:
As your expenses grow, so should your emergency fund. Ideally, you should have enough saved to cover at least three months of living expenses. If your current fund is below this amount, now is the time to top it up.
3. Pay off debt:
A promotion gives you the financial breathing room to tackle any outstanding debts. Paying off high-interest debt like credit cards or personal loans should be a priority, freeing up future income for saving and investing.
4. Reevaluate your investments and goals:
With an increase in income, consider boosting your discretionary investments. Whether it’s saving for a child’s education, planning a big trip, or investing in your retirement, promotions provide an opportunity to accelerate progress toward your financial goals.
5. Check your tax obligations:
A higher salary might push you into a new tax bracket. One way to offset this is by increasing your retirement contributions, which can help lower your taxable income. Additionally, ensure that your risk cover and retirement contributions automatically adjust with your salary if they are part of your benefits package.
6. Talk to your financial planner:
Whenever your financial circumstances change, it’s essential to loop in your financial planner. They can update your retirement projections and ensure you’re still on track for the future you want.
By staying proactive and thoughtful about your financial planning, both as an intern and after a promotion, you can achieve long-term financial security while avoiding common pitfalls.
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