You’ve been in school for 18+ years for this one goal: get your job, be independent and become a contributor to society. Well, you’ve done it!
Over the past few weeks, thousands of new graduates walk across the podiums to receive their degrees and they are now entering the workforce. They will be getting their paycheck and spending them. Whether you are just starting a new job or have been working for a few years, the principles apply to all: you must be responsible and cautious with your money.
For new graduates, getting your first paycheck from your first full-time corporate job is an incredible feeling. After some hard work, you’re finally reaping the rewards. That’s when it gets complicated. The temptation is to splash out and spend a big chunk on something for yourself. In fact, some people even recommend doing so. In some culture, you are expected to ‘bless’ your family with your first paycheck; how silly is that! If you want to become financially stable in the long term and have more money than days at the end of the month, it is important to be sensible with that first paycheck, and the rest of them. Your decision to spend wisely now will help you in the future.
The following are 4 steps you should absolutely take when you get paid now and forever.
Save and/or Invest
As brushing your teeth first in the morning, saving from your paycheck should be the first step you take. Whether you set up an automatic transfer to a savings account or a separate account, you must do it. Building a healthy savings account early on is vital to financial stability because it means you can deal with any financial curveballs that may come your way without having to resort to borrowing and getting on the slippery slope of debt. Emergencies do warn.
Investing some of that money is a good choice as well. For most, this step is usually done by the employer towards a 401k or similar account. You can make minor investments yourself. Since I have readers, all over the world, I wanted to share with you a solution that would apply in most places. CFD’s may be an option. Check out this intro to cfds for an explanation of how they work. Instead of buying an actual share itself, you’re essentially trying to predict whether the value of that share will go up. You can enter the trade a lot cheaper than buying a stock and if the value goes up, you earn money. Equally, you lose money if the value drops so always invest carefully.
Allocate for Giving
I talk about giving in my book, Money-Smart Millennials. This is a personal choice, but I found that taking my eyes off myself and blessing, whether a ministry or those in need, brings me much peace and truly, stability.
Check Deductions (first paycheck)
As a new employee, you will have to fill out several documents related to your pay, your deductions and your retirement planning. It is crucial to check that everything is in order on your first paycheck. So, check your deductions. Your deductions will include your insurance (if you pick one) and your retirement. Early in my 20’s, I did not care much about how much I was putting away for retirement. Although I have caught up, I recommend you pay attention to it. If your company has a matching plan (they match everything you pay in, doubling your savings) you have to make sure you’re signed up and you’re paying enough to qualify unless doing so affects your financial stability today. Nonetheless, it should be your goal in the future. When you don’t, you’re just giving up free money.
Pay Your Bills
Your paycheck may not cover all your bills unless you get paid monthly or high enough. Consequently, having a budget that allows you to plan is crucial. When you get paid, choose the bills that are due until your next paycheck and cover those accordingly. Not paying your dues leads to credit disaster and financial headaches in the future.
Be Responsible with The Remaining
Now that you’ve put some into savings or invested it, paid all your bills, given some away, the rest is for you. You’ll have to buy food, clothing, etc. The biggest mistake that I see millennials make is spending that remaining even irresponsibly. When you have covered your necessities, why not save any remaining extra? Always be sensible and budget an equal portion for each week so you’re never running out and desperately waiting for the next payday.
Incorporate in your spending some fun as well. Whether it is a dinner out or an evening at the movies, plan it out. The mistake comes when eating out or spending frivolously becomes a daily habit.
Do these 5 things with every paycheck and you’ll be on your way to financial stability in no time.
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