PSG answers your financial, budgeting, and insurance questions.
I’ve recently received a promotion and salary increase, but my expenses seem to rise just as quickly. What should my top financial priorities be to ensure I use this increase to build long-term wealth rather than simply upgrading my lifestyle? Bianca van Niekerk, Wealth Adviser, PSG Wealth, Vanderbijlpark Financial Planning.
Congratulations on the promotion! Unfortunately, it's very common for a salary increase to lead to a higher standard of living. Before you know it, people start spending their entire income without realising how they managed before the increase. The fact that you're asking this question means your head is already in the right place. I'm not sure what financial products you already have in place, but I'm going to assume you have a pension or provident fund through work.
Always start with an emergency fund. This should have enough liquid capital readily available for unexpected circumstances. It will ensure that you don't have to rely on your credit card to get through short-term situations, such as a burst tyre or needing to replace a washing machine.
Once that's sorted, start making a monthly contribution towards a savings product, such as a Tax-Free Investment Plan (TFIP). You can start with R500 per month, and you're allowed to contribute up to R46 000 per tax year. Make this debit order part of your monthly expenses so that it happens automatically.
