Just graduated and got your first job, first paycheck and still learning how to manage it well? Don’t worry as here are 5 mistakes to avoid when receiving your first paycheck and what you should do instead.
#1 The Logic of “More Money = More Spendings”
Regular paychecks would mean more money at hand. Given more money, you may feel like you have the power and ability to afford many things that were once in your wishlists. Since you have no other needs in hand (including saving), the logic of “More Money = More Spendings” may apply. The logic is not entirely false but it will not be beneficial for you when rainy days come unexpectedly as the money has been drained by the savings. You may end up finding yourself getting caught up in the vicious cycle of overspending especially knowing that your pay next month will be in soon.
#2 Regular Shopping Sprees
With the pandemic and lockdown, people are stuck at homes thus they often turn to online shopping and spend bulk of their money on the ecommerce sales eg 7.7,8.8,9.9. There is nothing wrong when it comes to spending your hard earned money on your wants. However, it is not wise when all your money goes to fuel the regular shopping sprees and none are left for the savings.
#3 Signing Up for Packages
Ever gone into a hair salon and was enticed into getting packages for a few thousand? The rationale of buying ‘packages’ as compared to per session costs may seem to account for an overall savings in the long run. In fact, this is not true as the “investments” made are not in good hands as they will not cover you for rainy days or medical bills.
#4 Making Saving the Last Option
With the first paycheck, be careful in getting caught up in the euphoria of being able to afford stuff you always wanted. Unexpected situations such as threatening
medical conditions may surface and not saving enough money may affect your ability to afford these unexpected costs. Savings should not be the leftovers from your spendings but it should come as a priority before all your other miscellaneous expenses.
#5 Not Sufficiently Covered with Insurance
Life is full of uncertainty especially with the pandemic, we are unaware of what the future holds for us, thus we should start saving and prepare ourselves for rainy days. To safeguard ourselves, we should be equipped with proper insurance coverage. You may not have realised the importance of insurance but did you know that insurance plans can save you during an unforeseen catastrophic event especially when the savings are not sufficient to tide you over. It is important to choose the right insurance plans and take this as an investment for your future and make it a necessity. It is better to be safe than sorry.
Though fret not as these are some things you could try with your first paycheck instead!
#1 Embark on Your Savings Journey
Allocate a portion of your income to your savings and allocate the remainders across your loans and daily necessities. If you are just starting out, you may choose to start small and slowly increase the amount of money that is put into your savings account.
#2 Spend Sensibly and Within Your Means
As a general rule of thumb, it is good to save aside 3-6 months worth of expenses to deal with unprecedented situations such as losing your bread and butter. This gives you some leeway to look for new jobs without having to stress over money.
#3 Learn to Differentiate Your Needs Versus Your Wants
This will help your savings go a long way. One tip to stop yourself from impulsive buys is to categorise the item that you wish to purchase and always check the money that you have left after spending on your necessities. It is good to treat yourself sometimes but make sure to not make it a habit.
#4 Always Have The End in Mind
It is good to have a short term and long term plan for yourself, about 2 and 5 years respectively. Seizing life and living it to the fullest is always the way to go, but we should have a plan in place, if not how else can we get there, if we do not know which direction to take?
#5 Seek for Professional Help
You may be unsure about what and how to plan your finances, but not to worry because there are many credible financial planners who are willing to give non-obligatory consultations. So don’t be afraid to approach any one of them and receive their help for better finances ahead!