Everyone remembers the time when they received their first salary, the feeling can be pretty exhilarating. It doesn’t matter what the amount is, chances are that you will be proud of your first paycheck. But once people receive it, very few people of them know what to actually do with it. Chances are that you will end up spending it on new clothes, phone or a vacation. And before you know it you have spent everything you had, and you are waiting for the next salary to come in. And the process continues like this for years until you realize that something serious needs to be done for the future.
I am not going to tell you to save everything you receive and not to have fun. The proper thing to do is to instill good financial habits since the start. If you spend a lot on food or clothes from the beginning, it can be very hard to control the urge to spend all of your money. Another good thing with learning how to manage your money since the beginning is the high returns you will get on it in the future. Let’s take a look at some of the things you can do with your first paycheck.
SAVE FIRST THEN SPEND
Warren Buffet once said that you shouldn’t invest what is left at the end of the month, you should first invest what you had planned originally and spend the rest of your income. If you do this, then you won’t have the pressure and stress of saving a certain amount throughout the month. Once a certain amount of money is gone from your account towards your savings or investments then your mind gets clear and you have more liberty to spend what is left of it.
A major part of this habit also involved making a budget. Decide first how much of your salary do you want to put away as investments and how you are okay with spending on certain luxuries. You will also need to take into account the necessary expenses like rent and EMIs.
TAKE OUT AN INSURANCE
This seems like too drastic of a step to take with your first salary but give it a though for a second. The earlier you get an insurance, the more relaxed you are about emergency expenses. For example, if you take out a health insurance, you won’t have to worry about losing all your money in hospital expenses. I am not just talking about health insurance here; you should take a home or car insurance the first moment you get your salary.
This is also one way of setting up an emergency fund. But the truth of the matter is that even if you start putting away a little bit of your money since the beginning for an emergency it is not going to be nearly enough to cover your health cost, house and car damage costs. With an insurance this is one thing which will be off your mind.
CLEAR ALL YOUR DEBT
This is also a very important step which might seem bit overkill, but it will save you a lot of stress in the future. if you owe any credit card debt or any other loans, it is the best idea to pay it off as soon as possible. Nothing is worse than making payments on old debts over a long period of time.
KEEP SOME AMOUNT FOR EMERGENCIES
Nobody could have predicted that the whole world will go into a lockdown. This led to a lot of businesses being affected and in turn a lot of people were jobless during the period. If you didn’t have any savings during this time, it would have been especially hard for you. That’s why you should put away a little bit money each month in case of an emergency. It can range from medical needs or basic sustenance. But you will feel much more confident once you know you have a backup plan for a couple of months after losing a job.