Getting your First Job

Case study: Securing your first job and career planning

Jeremy came to see us upon finishing university and landing his first full-time job in law. He had questions regarding how best to set up his finances to save for buying his first home, paying off his car loan and his Higher Education Contribution Scheme (HECS) debt while minimising tax and ensuring he was with the best super fund.

Repaying your student loan

Jeremy wanted to know whether it was financially favourable to pay off his HECS debt as fast as possible. Although HECS and Higher Education Loan Program (HELP) debts are normally paid off after your income reaches a certain threshold as a percentage of your pre-tax income, it is possible to get a 20 per cent discount when paying them off as a lump sum upfront.

Having studied Law, Jeremy’s debt was high. We advised Jeremy that, even though HECS is interest-free and indexed at the rate of inflation, it was likely to take him several years to pay it off considering the size of the loan and the fact that he would be on relatively low wages for at least two years after entering the workforce.

His parents were keen to help him purchase his first property. On our suggestion, Jeremy spoke with his parents about them giving him an interest-free loan to pay off his HECS debt in a lump sum, thereby taking advantage of the 20 per cent discount. He would stay at home paying minimal board while he saved to buy his first home. Jeremy opened an account to deposit the amount that he would have otherwise have had to pay in HECS to gather interest and be paid to his parents once a year until the debt was repaid in full.

Career planning

We advised Jeremy to ask his manager if his law firm had a formal or informal mentor system. Jeremy found a suitable mentor and set up regular monthly lunch meetings to ‘talk shop’. Jeremy is also hoping to complete an MBA so we advised him to talk to his employer to see whether they considered this relevant to his occupation and advantageous to his career. As it is a post-graduate qualification, Jeremy will need adequate funds to pay for each semester upfront and may be able to get reimbursed by his employer for units that he has passed.

Managing your cash flow

Jeremy had a couple of credit cards and was regularly offered a higher credit limit with a new card. We advised Jeremy to restrict all monthly expenses to one credit card, taking advantage of benefits such as award points and 90 days insurance on purchases, but ensuring he paid it off every month in the interest free period.

By using his credit card within these financial constraints and avoiding credit card interest, Jeremy is building up a credit record that will be useful when he applies for a home loan. Jeremy also reviewed his mobile/data plan as these bills were proving costly. That way, he would in future be able cap mobile phone expenses and avoid nasty surprises.

Choosing your superannuation fund

Superannuation is an important part of securing your financial future. Jeremy had two super funds from previous part-time work but was keen to get advice on which fund was best for him. After speaking to him at length, we advised him on a super fund appropriate to his risk profile, life stage and investment timeframe. He was also able to secure cost-effective life insurance through his new super fund and rolled the other two funds into it.

Understanding tax and budgeting

We referred Jeremy to an accounting firm for advice on tax concessions to which he was entitled and how to claim them. We also talked at length about the importance of budgeting and understanding what spending is discretionary and what is essential. We helped Jeremy set limits on his spending in order to save 20 per cent of his salary and deposit this into a high interest account.

Jeremy planned to live with his parents for another two years to save towards a place of his own. He came back to see us when he decided to move out ahead of his two year plan and rent for a period before buying. We talked about the potential impact this might have on his current savings plan and budget, and how this would affect his ability to purchase his first home within the two-year time-frame previously set. We discussed the expenses he would need to budget for the true cost of renting versus living at home, the references needed to be accepted as a tenant, tenants’ rights and responsibilities and how bonds work.

When Jeremy is ready to buy his first property, lenders will see he has almost paid off his HECS debt, with a good history of saving as well as a good credit rating.

Call StrategyOne today to arrange your obligation-free meeting: 02 9419 5233.

StrategyOne Advice Network is an authorised representative of Fitpatricks Private Wealth Pty Ltd, AFSL No. 247429, ABN 33 093 667 595 (“Fitzpatricks”).

The information in the above Case Study is of a general nature only and is not intended as a personal advice. It does not take into account your particular investment objectives, financial situation and needs. Before making a financial decision you should assess whether the advice is appropriate to your individual financial situation, needs and objectives. We recommend you consult a professional financial planner who will assist you.

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