Start saving plan with first pay cheque

We are already into the second month of 2008 and many people who started work for the first time have received their first pay cheques.

We are already into the second month of 2008 and many people who started work for the first time have received their first pay cheques.

How exciting. Your hard-earned deposit in your bank account is somehow so much more of an event than being handed pocket money by your parents, or even earning money from a temporary work assignment.

The best advice I can give any new employee is to start your financial planning right away, even before you bank your first cheque. Whether you choose an endowment policy, buy unit trusts or open a savings account, if the deductions happen from your first salary cheque you won't miss what you never had.

An analysis on your pay slip shows deductions such as PAYE, medical aid and pension or provident fund contributions. The balance after all these deductions is deposited into your bank account. Planned payments ensure that responsibilities are met. The logic here is the same as my message: compel yourself to invest part of your salary before you get used to having your whole salary to spend as you wish.

How much should you save each month? Accepting that each individual has different needs, as a general guideline I would suggest that you set aside 10percent to 15percent of your salary for your financial planning. You will have additional planning and contributions later.

Consider life and disability cover, but don't forget to check if your employer provides a group scheme. Most companies offer this cover as part of your employment contract. Funeral cover might also be included.

Find out what savings are included in your pension or provident fund and check what levels of group life and disability cover the scheme provides. These amounts might at first be sufficient for your requirements, but reassess your personal requirements every year.

Top up the levels if and when necessary, such as when you get married or have children.

At the age of 20 or 30 you will find that life products are surprisingly inexpensive.To remain financially independent involves worthwhile sacrifice.

So discipline yourself and start saving now. You need qualified, professional advice to maximise opportunities, preferably by developing a long-term relationship with a financial adviser.

l Bryan Hirsch is chief executive of Pioneer Financial Planning.

Visit www.pioneer.co.za or e-mail help@pioneer.co.za for more information.

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