Congratulations! You’ve just received your first paycheck, what are you going to do with it now?
One of the most widespread problems amongst college students is not knowing what to do with money and not being conscious enough about it. It is easy to make a mistake of spending a huge portion of a paycheck on payday and then realizing that you don’t have enough leftover for the rest of the week or month.
In order to avoid that, here are some tips on what to do with your first paycheck:
Create a Budget: The foundation of financial literacy begins with budgeting. Identify your essential
expenses like rent, groceries, and utilities. Allocate a portion of your income to discretionary
spending, but remember to prioritize saving as well. For a more detailed explanation on how to
create budget, check out our budgeting articles.
Pay Yourself First: It is crucially important to start saving before starting to think about all the “fun stuff” you can
do with your money. Paying yourself first, or in other words, automatically allocating your money in a
series of accounts such as: emergency fund, retirement, and tackling debt, is step one in setting up financial success.
Emergency Fund: Start building an emergency fund. Life is unpredictable, and having a financial
safety net can help you weather unexpected expenses without derailing your budget. Aim to set aside
at least three to six months’ worth of living expenses, this will give you a safe enough net in case of
unpredictable events such as job loss or emergency expenses.
Tackle High-Interest Debt: If you have outstanding high-interest debts, such as credit card
balances, consider using part of your paycheck to make extra payments. Reducing high-interest debt
early on can save you money in the long run. Remember, anything compounding against your debt could have
detrimental effects on your pockets. For more information on high interest rates debt check out our article.
Save For The Future: It’s never too early to start thinking about retirement. If your employer offers a
retirement savings plan like a 401(k), take advantage of it! Contribute a percentage of your
paycheck, and over time, compound interest will work in your favor. Be sure to take advantage of any employer match options! Or open a personal retirement account now and start investing early.
Set Financial Goals: Define short-term and long-term financial goals. Whether it’s saving for a
home, buying a laptop, or building a nest egg, having clear goals will guide your
financial decisions and keep you motivated.
Avoid Lifestyle Inflation: It’s tempting to splurge on luxuries when you receive your first
paycheck. While treating yourself is important, be mindful of lifestyle inflation. Avoid unnecessary
expenses that might compromise your long-term financial goals.
Seek Financial Guidance: If you’re uncertain about the best way to manage your finances, don’t
hesitate to seek guidance. Many colleges offer financial literacy workshops, and there are numerous
online resources and apps designed to help you navigate your financial journey. Reach out to Emory Financial Literacy Peer Mentors!
Remember, financial literacy is a continuous learning process. By taking deliberate steps with your
first paycheck, you’re laying the groundwork for a secure financial future. Start small, stay
disciplined, and watch your financial literacy grow alongside your bank account.