Payday has finally come and you are staring and your first ever paycheck. This is probably one of the most unforgettable moments of your life. Yes, it is very tempting to go wild and spend it all in one go. After all, it is what tradition dictates that you do. However, is it really the smartest way to go about enjoying your paycheck?
Think of this as the first test of your maturity. Every impulse is telling you to head for the nearest bar to spring for a round drinks with your coworkers or go to the mall and buy that pair of boots you’ve been eyeing. Being mature means squelching that impulse and taking time to think it over and going with the prudent and practical option.
Here are several tips for spending your first paycheck.
1. Set Aside a Portion to Indulge Yourself
Sometimes, giving in to your desire can be good for the soul. It can motivate you to do even better. The trick is to be in control. Receiving your first paycheck is indeed a momentous occasion and you should acknowledge that. Instead of spending every single penny on a blowout, just allot a percentage of your paycheck for spending. Depending on the size of your paycheck, a good benchmark would be about 20%-30%. Bank the remainder or put it to good use and be generous. Don’t just spend that money by yourself. Include your family or closest friends in your celebration.
2. Pay your Expenses for the Month
The months you have spent unemployed and job hunting could have put a strain on your finances. You have probably ended up tapping into your savings account. Well, that is, if you even have one. Your first paycheck is probably the first time you will have a plus sign on your personal ledger. Budget the money so that you it will last you until the next payday. This is now the best time to start living within your means. Being part of the working masses means you’re officially independent from your parents.
3. Bank it in a Savings Account
If you have some cash left over after paying all your expenses for the month that does not mean that you can now spend it on whatever you want. Just keep the money in your savings account and save for the future or for a rainy day. You should always have some money set aside for an emergency fund in case something unexpected happens. Once you’ve built up a tidy amount of savings over a span of time, you can move up and start thinking of ways to invest your money.
4. Start Paying Off Your Debts
Many student loans require you to begin paying it off six months after graduation. If you were able to get a job immediately, there’s no harm in using your first paycheck to make the first payment for your student loans. The earlier you pay them off, the quicker you become debt-free. If you pay them off faster, you will end up paying a lesser amount on the interest. That’s always a good thing. On a similar note, you can also put the money to good use by paying a bigger amount towards your credit card debt.
5. Buy a Life Insurance Policy
Many people in their 20s put off buying a life insurance policy. Your young age makes you feel invincible. You feel that you don’t need it since you are still single and do not have any dependents. Why think about the future when you can deal with the here and now? The fact it, a life insurance policy is one of the first investments that you should always make. It offers a level of protection that everybody should have. The premium will also be lower since you are still young and healthy. Buying while you are single makes sense because you have a bigger disposable income right now. You don’t have any diapers to buy, preschool tuition to pay for, or clothes that need replacing.
Receiving your first paycheck can be exciting. Don’t forget to keep your pay slip or even have it framed. How did you spend your first paycheck?