What I wish I had known before my first payday

Many South Africans start their working lives without ever being taught or understanding the basics of managing money. Schools teach algebra, the periodic table and Shakespeare, but rarely explain what to do with your salary once it lands in your account.

If I could go back in time and have a chat with my younger self before my first payday, these are the six lessons that would have made the most impact:

1.  Spend less than you earn

It sounds almost too simple to mention, yet this is the foundation of every successful financial plan. Surplus cashflow creates opportunity.

The key is to instil the discipline early: treat saving as a priority rather than an afterthought. When your salary arrives, pay yourself first.

“Lifestyle inflation” (to spend more as you earn more) will test you, but by not falling prey to this natural temptation you create the space where wealth can quietly start to grow.

2.  The risk–return relationship

One of the most important principles in finance is: more risk, potentially more reward.

Different investments carry different levels of risk. Cash in the bank is generally stable but offers lower returns. Shares in companies can grow significantly over time but will move up and down in the short term.

Understanding this relationship helps you avoid two common mistakes: being too conservative and missing growth over the long term and chasing unrealistic returns which can cause major losses.

Successful investing is rarely about finding the next miracle investment. It’s about choosing appropriate levels of risk for your investments which align with your goals and sticking to a disciplined strategy.

3.  Avoid non-essential debt

Debt itself is not always a bad thing. A home loan or student loan can be useful tools that help build long-term value.

The real danger lies in non-essential consumer debt.

Credit cards and store accounts make it incredibly easy to purchase things you couldn’t otherwise afford. The interest rates attached to this type of credit are usually exorbitant.

If you can build the discipline to avoid unnecessary debt early in your career and only purchase something when you have the cash for it, you remove a major obstacle to building sustainable wealth. Read more: What is the difference between 'good' and 'bad' debt?

4.  Don’t put all your eggs in one basket

Diversification is one of the most powerful tools available to investors.

It means spreading your investments across different asset classes, sectors, regions and managers rather than relying on a single investment.

By diversifying across investments, you reduce the impact of any single one performing poorly. While one factor is performing poorly, another may be achieving great returns.

And in investing, avoiding big mistakes is often more important than making big wins.

5.  Time is your best friend

One of the most powerful forces in finance is compounding growth.

Compounding occurs when the returns you earn begin generating returns of their own. Over long periods the impact of this can be profound. So much so that compounding is often referred to as the “eighth wonder of the world”.

The challenge is that compounding takes time. In the early years, progress feels slow and almost boring. But as the years pass, growth begins to accelerate.

This is why your first payday is such an important moment. Every year you delay investing is a year compounding cannot work for you.

Time is an asset; make it work for you!

6.  Get a financial adviser immediately

Many people assume financial advice is only for the wealthy or that they can do it themselves. The reality is that today, more than ever before, it is essential to have a partner with the financial knowledge and experience required to help you navigate the complex financial decisions that will inevitably occur over your life journey.

A good financial advisor helps you create a structured plan that aligns with your priorities. They also help you avoid costly mistakes and keep you disciplined when markets become uncertain. The earlier you receive good financial guidance, the more valuable it becomes.

Left on our own, it is very easy to make emotional decisions with money. An adviser acts as a steady voice reminding you of your goals and long-term plan during market volatility.

Final thoughts

Your first payday is the beginning of when you can start properly taking your financial future into your own hands.

If you can embrace these principles and apply them early, you can positively impact your financial future. Even that of your children.

Unfortunately, most of us only learn these lessons later in life after making a few expensive mistakes.

If we started teaching these basics in school and to our children, many young South Africans might enter adulthood with a little less confusion, a little more confidence, and more direction.