It’s easy to get excited about the financial opportunities that come with a new job.
Whether it’s your first time in employment, or you’re switching to a role with a bigger budget, the promise of extra cash in your pocket can take over your more rational side. Unfortunately, this means that you’re more likely to make the mistakes that could get you into debt and reduce your chances of reaching your financial goals.
If you’re starting a new job soon, it’s essential to make sure that everything you know about budgeting doesn’t go out of the window. Here are just five of the biggest mistakes that employees make when they get a new role.
1. Making a Big Purchase Straight Away
Whether you’re starting your first job, or you’re moving into a better-paid position, the promise of additional cash can often encourage you to make that big purchase you’ve been putting off for a while. Maybe you’ve been saving for a guitar that would have taken you years to buy – or you’ve always wanted to go on a solo vacation.
While there’s nothing wrong with using your income the way that you see fit -it’s essential to think carefully whether you’re making the right choice with your purchase. Your decision to lease a flashy sports car with your extra income may seem like an excellent plan until you realize that you’re going to be putting yourself in a financial hole when paying for the insurance, taxes, and extra fuel.
Don’t let extra money get the better of your logical side.
2. Getting the Wrong Loan
Just because you’re earning more money, doesn’t mean that you won’t still need a loan for certain things. Some people decide that once they have a new job, they can afford the repayments for the personal loan that they wanted to transform their kitchen or pay for their wedding. However, that doesn’t mean that you should go out and get the first loan you’re offered.
Make sure that if you decide to turn to credit, you’re getting a loan that suits your needs. Spending some extra time doing your research and comparing your options will help to ensure that you’re not paying more than you need to on things like fees and interest rates. Just because you can afford the extra interest doesn’t mean you should be paying it.
3. Not Saving for the Essentials
A new job or a hefty raise can sometimes send a message to your brain that you’re invincible, and don’t need to worry about the future anymore. You assume that now you have more money, you’ll automatically be able to handle any emergency that might come your way. Additionally, you might even tell yourself that you don’t need to worry about putting extra cash away for retirement now because you can always save more later.
An extra bit of cash in your bank account shouldn’t demolish your cautious side. Make sure that you’re still planning ahead with an emergency savings fund and a retirement strategy that will keep you and your family save for years to come. You’ll thank yourself for it later.
4. Forgetting about your Taxes
Whether it’s your first job or a better-paying career, it’s important to think carefully about what earning more money will mean to your income taxes. You might need to pay more in estimated tax, and you might not realize that your tax accountant might ask for more money too. Speak to a professional as soon as you’re set up at your new job so you can figure out how to be prepared when tax season comes around.
Remember, you don’t want to be dealing with unexpected tax expenses in April when you don’t have the time to find the extra cash you need in your savings.
5. Not Revising your Budget
Finally, whenever something about your income changes, it’s always a good idea to revise your personal budgeting strategy. If you haven’t even put a budget together yet, then a change in career is an excellent opportunity to start making sure that you’re getting the most out of your money. Sit down either by yourself or with your partner and figure out exactly how much money you have coming in and going out each month.
Ensure that when you’re assigning your cash to different parts of your budget, you also leave aside a little bit of money “just in case” for the things you might have forgotten about.