I’ve often thought of the life I could have had if I could combine the potential and energy I had at 20 with the confidence and financial life lessons I knew at 40. Here’s what I wish someone had told me before I received my first paycheque.

Draw up a budget. This lists your income and expenses for the month and the intention is to help you to keep your spending in check so that you don’t need debt. Budgeting is going to be a continuing necessity, so best you get used to it now. Revisit it mid-month to make sure you’re staying on track.

Join a good medical aid scheme. You probably only need a hospital plan at this stage of your life. However, joining now is a good idea because, if you leave it too late, you can be charged a penalty fee and higher premiums for joining later in your life.

Pay yourself first. This doesn’t mean splurging because you only live once or deserve it. This means saving for retirement from day one, even though it seems an awfully long way off. If your first salary is R10,000 a month, subtract 15% and tell yourself that it is really a salary of R8,500. You will benefit hugely from the power of compound interest on your savings as the years go by.

Get life cover. If you already have dependants, you need to get life cover so that they are financially provided for if you die. You might be healthy as a horse, but that won’t stop you from dying in a car accident. You should also insure your most important asset – your earning ability – by taking out income protection cover.

Spoil yourself a little. You’re young, we get it. Sure, you can spend money on yourself. The key is not to splurge and make sure this expenditure is in the budget.

Start saving towards an emergency fund. Set aside money in a savings vehicle that you can access quickly when you need it, because… life. Expenses crop up randomly and when you least expect them. Be like a Boy Scout and be prepared.

There are also some common mistakes you should try to avoid. They include:

Fixating on your gross salary. Remember that the salary you are offered by an employer is not the amount that will land in your bank account each month. Depending on your employee benefits, there will be deductions for retirement fund and medical scheme contributions, as well as income tax.

Do-it-yourself salaries. Many companies today are increasingly paying a set amount and do not offer benefits such as a retirement fund or medical scheme membership. This means the onus is on you, so be sure to sort out these important financial commitments before you commit to anything else (like a store card).

Expensive cars. When you’re young and first taste financial freedom, it is all too easy to want a car that can get you around. Buy a second-hand one if you can. A vehicle is a depreciating asset and will not increase your net worth. Stay away from a residual structure if you are taking out vehicle finance – it is a red flag that the car is not affordable on your salary.

Thinking you have all the time in the world. An FNB Retirement Insights Survey this week revealed that a number of clients aged 18 to 25 only plan to start saving for retirement at the age of 31. This will put severe pressure on them to save a bigger percentage of their income from 31 to “catch up” for the years when they put off saving for retirement. DM