Get off to a good financial start

As the end of the year fast approaches, many students will soon be graduating and making plans for their future. Those starting new careers and entering a different life stage will want to make the best possible decisions to ensure that their future plans and financial well being is taken care of.  

Taking the right steps from the beginning will help graduates to build a financial nest egg and assist them in being able to buy the house of their dreams when they decide to do so, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

Pay off student loans

Goslett says that the first step for a graduate is to pay off their student loan as quickly as possible and start off with a clean slate. “New graduates will be able to take advantage of the current low interest rates, which will assist them in paying off their loans over a reduced period. Once student loans have been paid it off, the graduate will have extra money to budget for other things or add to their savings,” says Goslett. “South African consumers generally have a high debt-to-income ratio, but, by taking the initial steps and reducing debt from the beginning, graduates can be sure they are starting off on the right foot.”

Live within your means

With the transition from student to money earner, there is often the temptation to indulge and spend money on unnecessary luxury items. Goslett says that where possible, graduates should live within their means and avoid making large purchases when initially starting out. “If possible graduates should steer clear of purchasing items that could leave them in debt that could take years to pay off. Getting into debt early could affect the graduate’s chances of bond approval at a later stage if it is not paid off.   Due to the nature of credit applications and the need for buyers to show affordability for bond approval to be granted, it is important that graduates exercise disciplined spending habits from their first pay cheque,” he says.

Build up your savings

According to Goslett, the sooner the new graduate can start saving the better. “With South Africa’s current household saving rate at approximately 16%, which is regarded as low compared to other countries with emerging markets, it is no wonder that many consumers are struggling to meet the deposit criteria required by banks. Aside from potential home buyers needing savings for deposits, there are also other expenses that will need to be paid by the buyer during the sales transaction process. If possible any salary increase that the graduate receives should be put towards building up savings instead of splurging on an expensive purchase or holidays,” advises Goslett.

Be prepared for emergency

He adds that part of the savings should be for an emergency fund. “Due to life’s unpredictability, it pays to be financially prepared for the unexpected. As a rule of thumb, many financial advisers recommend that the emergency fund should contain enough money to cover living expenses for a period of six months. Having an emergency fund will reduce the need to use credit cards or personal loans when unexpected expenses occur,” says Goslett.

Consult with a professional

A professional financial adviser will be able to assist the graduate with drawing up a budget as well as providing them with personal finance plan that will help them obtain their future goals.
“Young professionals that start with the right foot forward and utilise the correct money management techniques will later be able to take advantage of opportunities that present themselves in the property market.  Implementing a financial plan from day one will assist graduates in realising their property- ownership dreams in the future,” Goslett concludes.  

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