What to Do With Your First Paycheck
26 Nov 2017

What to Do With Your First Paycheck

It’s the end of your first month at work, and you’ve received your maiden paycheck. Ah, the first sure step towards financial independence! But before you run off to celebrate your shopping prowess, here are some ideas of what you could do with your first salary.

Building your stash: The 50/30/20 Rule

How much should you spend, and how much should you save? A good guide is to follow the 50/30/20 rule. First, divide your take-home salary into the following portions:

  • 50% expenses
  • 30% savings
  • 20% investments

Now we’ll look at what goes into each.

Budgeting: Master the big 50%

Fashionable work clothes on a rack

It’s perfectly fine to reward yourself for your hard work. However, prudence is key – without careful planning, your budget will quickly diminish. Besides the obvious essentials—food, transport, groceries, telco bills, rent (if you’re on your own), or allowance for the parents, prioritise things that make you happy and help in your growth.

For example, with your first paycheck, you could pay for a weekend class to keep learning new skills. Or you could invest in a good suit to add to your workplace wardrobe, that could aid your career growth.

30% savings: Starting your rainy-day fund

Woman checking her savings account with POSB digibank

You need about three to six months’ savings to be termed ‘financially stable’. This means clear liquid money with zero debts to cover, saved up for emergency purposes. Life is full of surprises and you’ll never know when you’ll need the money. Your investments may form a part of this fund if they can be converted to cash quickly as and when needed.

If it helps, consider having two bank accounts: one for salary crediting and daily expenses, and the other to build your emergency fund.


Grad trips to change the world (and yourself)

You’ve survived university and the dreaded final exams. Now it’s time to reward yourself with a well-deserved break before diving into the corporate world.
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