Earning a large salary does not always take care of all financial worries.
Large sums of money coming in on a regular basis can make the earner feel invincible, resulting in reckless spending with little thought for the future.
High earners are traditionally big spenders: expensive cars, big houses in good areas, overseas holidays, fine dining. Generally, you shouldn't spend more than 40percent of your pre-tax salary on your bond, car loans and other debts. At present this figure is as high as 75percent. If you're spending more than this, chances are you aren't saving much, if at all. In the long term, this can be a recipe for disaster.
To make the most of your salary and still enjoy a quality lifestyle, financial planning is essential. Goals need to be set and key issues addressed: spending within a budget, contingency plans for the short term and, most importantly, savings for the long term.
Make sure you are not living beyond your means through careful examination of your monthly expenses. Once you have deducted major expenses, determine how much is left. From this, allocate a set amount for all luxury spending. Set aside a certain amount for savings, and never allow your expenses to eat into this.
Make every effort to stick to this budget - every time you exceed it, even by a little, you jeopardise your future. A budget is only useful if you stick to it.
Earning a high salary means becoming accustomed to a high standard of living. Often a work pension package is not going be enough to maintain this once you retire. It is wise to create additional savings plans so you enjoy your retirement to the full, unencumbered by financial restraints. Invest this money carefully and try to maximise your tax-free saving options.
If you're a high earner, enjoy it! You're talented and work hard, so you deserve what you earn.
Think of your salary as a luxury car: an object of power and beauty that has to be driven carefully and safely: plan your route in advance, do not exceed the limit and make sure you exercise restraint at all times so you arrive at your destination safe and sound.
The peace of mind that comes from knowing one's finances are under control is infinitely preferable to the thrill of frivolous spending.
lBryan Hirsch is chief executive of Pioneer Financial Planning. Visit www.pioneer.co.za or e-mail firstname.lastname@example.org.