3 Things You Should Do When You Receive Your First Paycheck

3 Things You Should Do When You Receive Your First Paycheck

What are you going to do with your first paycheck? Ask a bunch of millennials that, and they’ll probably tell you: buy a Prada bag, open a bottle at the club so all their friends can celebrate, or treat their family to a lavish dinner.

For most of us, it’s too late to turn back time. But for those of you who are still young enough to have an as yet unborn and unmolested first paycheck, here are three things to look out for so that you can use your salary in much smarter ways when the time comes.

Resist the urge to splurge or treat the entire world

When you first receive a real, grown-up salary, it can seem so out of this world that you lose control of all common sense and start fantasising about ways to spend it all. I remember the days when $1,000 seemed like such a big deal.

If a designer handbag seemed totally out of reach to you before, guess what, you can now technically afford it! If the only watches you ever wore were from Casio or Swatch, guess what, you can get a decent one now!

Then you start thinking of all the people who’ve supported you throughout your life and helped you get to where you are today, and you suppress the urge to make a teary Oscars speech. Instead, you gleefully whip out your wallet each time you’re out with them and utter those famous words: “I TREAT YOU!”

So what’s the harm in spending your first paycheck when there are many others on the way? The problem with this kind of attitude is that it usually doesn’t last for just one month. Trust me when I say there’s always some new, exciting thing to spend your entire month’s salary on.

Beware lifestyle inflation

If this is your first job after years of being a broke student, you’re going to suddenly feel like you can afford to do grown up things. You will no longer have to worry about not having enough cash to pay for a cab ride home, nor will you ever have to eat at Pastamania again.

That’s all very nice to know, but beware of inflating your lifestyle too much. As people’s incomes rise, they also tend to increase their spending.

The problem is that this can turn into a never-ending upward spiral. That’s why you have people who drive Audis seeking help from Credit Counselling Singapore.

It’s best to be aware of lifestyle inflation the minute you start work. It’s not a bad thing to retain the old habits you had when you were young. There’s no point in trying to emulate the supposedly glamorous professionals in the CBD, especially when you know that many of these people are in credit card debt just to upkeep that glittering facade.

Put in place financial goals appropriate to your newfound income

Financial planning should start from day one, and not when you’re “old”. Now that you’ve got a full-time income, you can afford to make financial goals.

That means building up an appropriate emergency fund equivalent to several months’ worth of monthly expenses.

It also means coming up with a budget. Sorry to break it to you, but grownups don’t get a free pass to splurge all that hard-earned money on shopping, booze and cars.

The reality is that saving and investing are what will stop you from working till you die, and the likelihood of that happening is lower if you start early. So you need to decide how much you can save and invest based on your income, and then work out a budget for the other spending categories like food, entertainment and so on.

If you have student loans to pay off or, for those whose education was funded by the CPF Education Scheme, need to pay money back into your parents’ CPF accounts, it’s very important that you allocate enough money for these payments. If you want to pay off your loans early, you’ll have to cut back further in other areas.

Being a grown up isn’t much fun if you’re saddled with tons of debt or can’t make ends meet. By being responsible with your money now, you’re setting yourself up for a less stressful adult life.

What do you plan to do with your first paycheck or, for those who’ve already started working, what did you do with it? Tell us in the comments?