So, you have completed your graduation; no more classes, exams, and grades. Now you are a sincere employee of a good firm who is working hard to shine. And, you are finally ready to make your own money. So, what’s your plan to do with your first salary? The first paycheck can make you feel like the richest person in the world. However, you shouldn’t spend the entire money! Being extravagant at the beginning of your career can create financial troubles. You should understand the value of your hard-earned money.
Look at the things you can do before your first paycheck arrives to do justice with it.
1. Learn how to formulate a personal budget
It may sound boring. But budgeting doesn’t have to be a boring subject. Because it is the key to manage your first paychecks like a pro. Without a budget, you can’t manage your monthly income and expenses. A budget helps to achieve your financial goals in the long run.
How to budget your paycheck
Think about your expenses and write down in a spreadsheet. Deduct your total expenses from your monthly income. The expense shouldn’t be greater than your income. Make sure you have money in hand after meeting your basic expenses. The extra money is your future savings. You can use online budgeting software or spreadsheet to create a budget.
2.Learn the importance of paying credit card bills on time
Before you start earning money, you should learn how to manage credit cards properly. Credit cards are important; they help to build a credit score. But, you shouldn’t use them randomly.
Also, many people think credit cards are free money, which is wrong. Remember, credit cards are not free, you should pay the bills in full and within time. Otherwise, you will start accumulating a higher interest rate. Thus, you can fall into credit card debts. If you still ignore the debt, you will get collection calls for the outstanding debt. So, you should use the credit card when you know that you can afford the bill.
3. Take an oath to remain current with your monthly bill payments
Not only credit cards, but you should also pay all your monthly bills on time. So, you should try to stay current with your payments. If you’re unable to manage your expenses, then at least make a minimum payment so that you can avoid debts in the near future. These factors will help you to avoid spending the entire paycheck.
4. Learn how to spend less than what you earn
Once you start earning, you may feel like you can get anything you want. But, you shouldn’t think like that. Your paycheck shouldn’t be only for your luxurious spending. You should save money to achieve other important financial goals. Thus, try to understand the difference between need and want. It will help you to manage your first paycheck.
5. Create your own financial priority list
You can’t meet every financial goal with your first paycheck. Thus, you should create a financial priority list or financial goal list. It will help you to make progress on the goal while managing other necessary expenses using your paycheck.
- Saving a certain amount for emergency expenses in a high-yield savings account.
- Opening a 401(k) account to save for retirement.
- Saving money for a downpayment of home or car
- Paying off student loan debt
6. Remember your due dates
Make it a habit to remember the due dates on your multiple credit card accounts. If you tend to forget, make sure you create some alerts in your mailbox or your cell phone so that you can see and remember that it’s time to make your minimum monthly payments. If you fail to make your payments within the due dates, you’ll most likely accrue late fees and penalties that will unnecessarily boost your monthly payments.
7. Choose a good bank
These days, you will get different types of credit cards for different purposes. For example, you can buy a travel credit card to get the benefit or you can purchase a gas credit card. Gift card, a payroll card, and store cards are also useful to earn reward and benefit.
Yes, credit cards are convenient tools; they help in many ways. But to get benefit from multiple credit cards, you have to manage them properly.
Also, you have to choose the right bank for purchasing the card that you need most.
8. Become financially educated
Understanding money is important since it has a great impact on your life. Financial literacy is understanding how to manage finances properly. Financial knowledge helps you to use money responsibly. You can learn how to budget your paycheck. It also helps you to make the right decision about spending, taxes, banking, savings, and investments.
Lastly, getting the first paycheck after completing studies can be exciting. You deserve to be pampered using your own money. However, you should be responsible when it comes to handling money even if it is your own. Once you get your first paycheck, you can pay yourself a certain amount so that you can enjoy in a way you like. After that, you should use your financial wisdom so that you can maximize every paycheck you earn.