One of the best things about starting work is the freedom that comes with earning money! Starting a first job is a good time to think about what we want in life. Having goals and a plan will help us create the kind of life we want for ourselves – right from day one. Getting an early start on long-term goals really pays off, as we can use the power of the eighth wonder of the world: compounding returns! When starting a first job there are also a few basics to sort out, like getting an IRD number, choosing the right tax code and enrolling in KiwiSaver.
Your employment agreement will show how much you’ll be paid as well as holiday pay, sick leave and any bonuses or commissions. It’s illegal for an employer to pay less than the minimum wage.
Find out more about the minimum wage on the New Zealand at Work website.
When you get paid, your employer will probably also give you a payslip (paper or electronic) which will show:
Everyone needs an IRD number and tax code when starting work (except for school students earning less than $2,340 a year). Your employer will give you a tax code declaration form to fill out.
It’s important that your employer has the correct tax code for you. Otherwise you could pay too much tax - or not enough and have to pay extra tax at the end of the year.
Your IRD number helps your employer deduct the right amount of tax and give to Inland Revenue. If you don’t give your employer an IRD number you’ll be taxed at a higher rate until you supply one. Find out how to get an IRD number when starting a first job on the Inland Revenue website.
There’s more information about paying tax and tax codes on Inland Revenue’s What’s Tax website.
If you’ve worked less than 12 months at the end of the tax year (31 March) you may be entitled to a tax refund. Inland Revenue’s personal tax summary calculator can help you work out if you can claim a refund.
All employers offer KiwiSaver, the government’s workplace retirement savings scheme. Your employer will enrol you automatically unless you opt out. For most of us it’s a good way of saving for retirement – or for a first home.
KiwiSaver offers some great benefits:
After saving for three years, you may be able to put some of your savings towards buying a first home, which the government may also match up to a certain level. Find out more on the Housing New Zealand website.
Some employers also offer their own workplace retirement savings schemes, which may have different contribution rates and benefits to KiwiSaver.
You can belong to both schemes, but your employer only has to contribute to one.
Some employers offer other benefits as well as KiwiSaver. It’s worth finding out about these as they may boost your pay, save you money, or help to progress your career.
The benefits may include free or subsidised gym membership, professional development courses or subsidised training, health insurance, eye checks, free counselling, free or subsidised housing, or even a company car.
If you were getting any government benefits before starting a job, you’ll need to contact Work and Income to see if the job will affect them.
People with children may be eligible for Working for Families payments. It’s a government package designed to help make it easier to work and raise a family. It pays extra money to:
Find out more on the Working for Families website
When first starting work it can be tempting to spend everything we earn – there’s nothing like that flush feeling after a first payday! But we’ll be much better off if we get into the habit of putting some money aside to help reach our goals.
Whether it’s a house deposit, car, overseas travel or study, a budget will help you get there. Once you know how much you’re getting paid, you can make a budget with this budget planner.
When making a budget you list what we earn, what you expect to spend, and find out whether you have any money left over.
If the budget shows there is some left over, but you owe money on credit cards, hire purchase or other loans, put it towards paying off those debts. Otherwise, it’s fair game to use for saving for your goals!
Check out the investor kickstarter to see the long term impact of saving an extra $50 a week. Over a working lifetime, saving and investing early and sticking with it can result in six figure sums for us in later years.
This also applies to KiwiSaver – contributing just 1% more than the minimum 3% from your first payday can boost your long-term savings by more than $100,000. If you bump your contributions up to 8% from day one, the effect is even more dramatic – perhaps even quarter of a million dollars extra! Use the KiwiSaver account calculator to see just how much the difference could be.