Yahoo Finance Just Got Your First Job? 9 Things You Must Not Do With Your First Paycheck
The first time you earn a paycheck at your first job is an exciting time, and it’s understandable to want to spend that money right away. However, even if you don’t have bills awaiting you, it’s important to pause before you blow your first paycheck. That money can go toward a lot of useful things, such as building an emergency fund or seeding a vacation fund.
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Here, financial experts cover several examples of things you should not do with your first paycheck.
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Impulsive Spending
Impulsive spending, particularly on new electronics or luxury items, can really hurt your budget, according to Diana Howard, financial analyst at CouponBirds. Instead, you should plan out how to allocate your income.
“If you really need some tech thing or beauty product, buy a cheaper and generic product instead. For example, generic beauty products can save you $50 on average compared to branded ones,” she said. She also emphasized the importance of building an emergency fund to prepare for potential future risks instead of blowing your first check on wants.
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Make Minimum Payments on Your Loans and Bills
If your first paycheck marks the beginning of paying back loans or starting to pay bills, Howard said that it’s problematic to only make the minimum payments.
“To address this, try to pay extra money each month to decrease the interest and pay off your debt early. For instance, on a $10,000 loan with a 3-year term and a 5% interest rate, an extra $100 a month would pay it off 9 months earlier, saving you $207 in interest,” she said.
Overspend on Takeout or Unnecessary Subscriptions
It’s all too easy nowadays to subscribe to things you don’t need with the touch of your smartphone, or order food instead of cooking at home because it’s convenient.
Howard warned, “Spending too much money on food deliveries or subscriptions you don’t need can hurt your budget. Instead of ordering takeout, try to cook more meals at home. And try to use coupons every time before you order takeout.”
Celebrate Irresponsibly
It can be tempting to celebrate your first paycheck by splurging on big purchases like a new car or extravagant travel, Howard said. “However, it would be more sensible to celebrate with your family instead. Consider…having a nice but reasonable dinner or small party at home.”
Following those measures can help people make wiser money decisions when they get their first paycheck.
Forget To Be Strategic With Your Money
If you haven’t even thought through how you’ll be spending your first paycheck, you’re already behind the curve financially, according to Loretta Kilday, spokesperson for Debt Consolidation Care.
She said, “I would advise people who are getting their first jobs to take a careful and strategic approach to their finances. Your benefits package is important because it makes up a huge part of your pay. Start early and maximize your contributions to retirement, especially if there is an employer match. It is not advisable for one to hurry when making lifelong financial commitments like owning a home. Be careful with lifestyle inflation, so do not spend more as you make more money.”
Lastly, after identifying your income and expenditures, she recommended you consult a financial planner. “This way, you will lay the groundwork for your future financial stability.”
Blow It on Big Ticket Items
You should not spend your first paycheck on any big ticket items like TV’s or other expensive electronics, according to Tim Connon, founder, CEO and life insurance agent of ParamountQuote Insurance Advisors.
“Also do not spend it on going out to eat to celebrate your new job. Instead you should be saving the money and only spend a higher amount maybe twice a month depending on your salary. This will keep you from spending all your money and keep you on the path to building your savings,” he said.
Treat It as Extra Money
There’s a common misconception that the first paycheck is bonus money to be used for fun, said Chris Kille, owner of PaymentPilot.com. “In reality, it’s the foundation of your earnings. Treat it with the same respect as your future paychecks. It’s not extra — it’s the start of your financial independence.”
Try To Impress Others
Kille warned that peer pressure can be a real issue, especially when you’re starting out. He stressed that you should avoid the trap of spending to keep up appearances. “Whether it’s extravagant meals out or designer clothes, spending to impress others sets a dangerous precedent and can lead to a cycle of living paycheck to paycheck,” he said.
Ignore the Power of Savings
It’s easy to think you’ll start saving with the next paycheck. But according to Kille, “The best time to start is now. Even a small amount set aside from your first paycheck can kickstart a healthy savings habit.”
Remember, your first paycheck is more than just money — it’s your first step into financial maturity. “Treat it as a milestone for learning and setting up healthy financial habits that will benefit you throughout your career,” Kille said.
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This article originally appeared on GOBankingRates.com: Just Got Your First Job? 9 Things You Must Not Do With Your First Paycheck
