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Financial advice for women starting out their careers

Taking a set of intentional, strategic steps at the outset of your career can be pivotal to your financial success.

If you’re just starting out your career, now is the opportune time to put plans in place to secure your financial future and to align your financial planning with the goals you have in terms of your career, marriage, parenting, travel, and other lifestyle pursuits. So much of one’s future financial security is dependent on the foundation we lay early on in our careers, and taking a set of intentional, strategic steps at the outset of your career can be pivotal to your financial success.

Know your workplace value and negotiate

In order to enter employment negotiations, it’s important to understand your worth in the workplace taking into account the qualifications, skills and experience that you bring to the negotiation table. While it’s true that times are tough economically and employment is hard to come by, be careful of selling yourself short simply to get a job. Do your market research and get a gauge for your workplace value before going for job interviews, and don’t be afraid to negotiate.

Contribute towards your company pension fund

At the outset of your career, take advantage of any retirement fund offered by your employer, keeping in mind that you are able to invest up to 27.5% of your taxable income towards a registered retirement fund on a tax-deductible basis. While you may not be able to achieve this level of saving as you start out your career, careful budgeting will help you set aside a portion of your income to earmark for retirement savings.

Invest aggressively

If you’re in your mid-twenties, you’ve probably got at least 35 years ahead of you to save for your retirement. An investment timeline of this magnitude means that you can take more investment risk, so be sure that your investment portfolio is geared for growth. While your exposure to growth assets may be somewhat limited by Regulation 28 of the Pension Funds Act, consider the option of setting up a discretionary investment, such as a unit trust portfolio, which will allow you to expose your investments to more growth assets and greater offshore exposure. If you’re contributing towards your employer’s retirement fund, avoid opting for the default investment strategy as this is very often a more conservative strategy more appropriate for those who are nearing retirement age.

Secure adequate emergency funding

Having access to emergency funding is an important safety net that will help you avoid accessing debt in the event of a high cost, unforeseeable event. Building up emergency reserves may take time, but with resolve and consistency, it can be done and should be made a priority at this stage in your career. Online banking functionality should allow you to seamlessly set up a separate emergency account with a regular debit order. When determining the most appropriate level of emergency funding, give careful thought to your unique situation taking into account factors such as the industry in which you are employed, the risks of retrenchment, whether you have pets, your employability, and whether you have other forms of income to fall back on.

Drive a safe, reliable vehicle

When it comes to choosing a vehicle, prioritise your safety above all else. A vehicle is a depreciating asset, so strive to find a safe and reliable vehicle that is well-priced and which holds its value over time. While you want to ensure that your vehicle is safe, pay careful attention to those features which can ensure your personal safety such as follow-me-home lights, anti-hijacking devices, central locking, and vehicle tracking devices. Avoid vehicles that use expensive or imported parts, or that have overly complicated electronic systems, as these will only cost you in the longer term.

Start building your credit score

In order to access any financing or credit, you will need to have a good credit score, so take steps early in your career to secure a good credit rating. Operating a private bank account in your own name and ensuring that it is well-managed is the first step towards building a good credit score. Although you may not need one, it may be worthwhile applying for a credit card so that you can have a credit history on record, even if you make one purchase on the card and then pay it off in full. Take time to check your credit score online, which you can do through companies such as TransUnion and Clearscore, to ensure that no fraudsters have used your name, ID number and personal details to apply for credit without your knowledge. This can and does happen, and it can be an enormously frustrating process to try and clear your credit record.

Protect your future earnings

At this early stage in your career, securing an income protection benefit through a reputable insurer should be a priority. While you are young and relatively healthy, long term insurance will be somewhat more affordable so try to secure the most comprehensive income protection cover you can afford. If your employer offers group life cover, it is likely that they will provide you with disability cover as part of the package, so find out exactly what the policy offers, keeping in mind that group disability cover will generally be more cost-effective than taking out cover in your personal capacity.

Be intentional about building wealth

Generally speaking, women make excellent investors because they are more likely to seek and follow advice, and more capable of remaining composed in times of market turmoil. Use this to your advantage and be intentional about building your personal wealth. While money cannot buy you happiness, it can buy you time and options – and these benefits may come in handy if and when you decide to have children. Having accumulated wealth means that you don’t have to stay in a job that you hate, remain in a relationship you cannot escape from, or be forced to carry on working even though you’d love to stay at home to raise your children. The options that accumulated wealth provide are endless and invaluable, so start your investment journey with your first paycheque and don’t stop.

Put yourself first

Women are by nature carers and helpers especially when it comes to looking after elderly parents, sick family members, domestic workers, and other family members in need. Being everybody’s support system can take its toll on you mentally and physically, and can also affect your employment and/or ability to generate an income. To fulfil your caring commitments to those that you love, you need to first take care of yourself, your mental health, your physical health, and your job.

Understand your unique set of challenges

Women have a unique set of financial planning requirements that need to be carefully planned and provided for. Besides the gender pay gap (which is still very much in existence), women are more likely to have their retirement savings interrupted during the childbearing years. This, coupled with the fact that women live between two and five years longer than men, means that women need to save more for their retirement. Further, women very often need to withdraw from their retirement savings in order to help fund their expenses during their childbearing years, and this can significantly set back their retirement funding. Ideally, find an independent advisor who understands and appreciates the unique challenges you face, and who is willing to work with you to develop a plan that caters for your specific set of circumstances.

Budget

While you are young and your expenses are relatively simple, get into the habit of budgeting and living within your means. The age-old adage, ‘wealth is what you don’t spend’, will forever hold true, so start out your career by spending less than you earn and putting away as much as you possibly can. Most online banking apps include excellent budgeting facilities which assist in categorising and tracking expenditure, which can be invaluable especially when operating on a primarily cashless basis.

Choose your matrimonial property regime wisely

If you’re planning to get married, avoid opting for the default matrimonial property regime, being in community of property, simply because it does not require the upfront cost of having an ante-nuptial contract drafted. This form of marital regime, which involves the formation of a single, joint estate that is shared equally between you and your spouse, means that you will effectively be responsible for all your spouse’s debt, including that which he incurred before your marriage. The preparation of an ante-nuptial contract involves nominal upfront legal costs and will afford you the privilege of tailor-making a matrimonial property regime that protects your financial interests into the future.

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