The day that you receive your first salary is a significant milestone that marks the beginning of your financial independence and a transition into the world of adult responsibilities. You’ve worked hard to get here, and now, with your first paycheck in hand, you may be wondering how best to spend it.
There is, of course, the temptation to splurge, but remember that this moment offers you a unique opportunity to make thoughtful choices that will set you up for future success. Be intentional with your spending, and you’ll be able to create a solid financial foundation for the years ahead.
So what’s the best way to spend your first paycheck? Should you open a time deposit account with Maya Bank that will allow you to accrue from a growing time deposit interest rate every time you park money into it–and perhaps even open up to five Maya Time Deposit Plus accounts for your emergency fund, savings, and more? Should you invest in items that will help you level up in your professional endeavors? Or perhaps you can use it to celebrate this milestone with the people nearest and dearest to you?
Here are tips that will help you decide where you can best allocate your hard-earned funds:
1) Before Everything Else, Create a Budget for Yourself
The first step to making the most of your salary is creating a proper budget for yourself. This will help you keep track of your income and expenses so that you know exactly how much you can allocate toward different aspects of your life.
Start by listing your fixed expenses. This can include items such as rent, utilities, transportation, and any loans you’re paying off. Then, estimate how much you need for variable expenses like food, entertainment, and personal items.
If you’ve never budgeted before, there are many apps available to make this process easier. Once you understand where your money is going, you can start to plan how much you want to spend, save, or invest.
2) Make Good Progress in Paying Off Existing Debt
For many young professionals living in the Philippines, simply getting a job entails a lot of sacrifices, like borrowing funds to support one’s education or job-hunting journey. If you have any existing debt, especially high-interest debt such as credit card balances or student loans, paying them off should be one of your top priorities. Debt can quickly accumulate, and the longer you wait to pay it down, the more interest you’ll end up owing.
If you have multiple debts, consider focusing on those with the highest interest rates first. You can also use the snowball method where you pay off the smallest balances to build momentum. Eliminating or reducing debt early in your career will free up more of your income for future goals and give you greater financial freedom.
3) Start Building an Emergency Fund That Will Sustain You in Difficult Times
Unexpected expenses are a fact of life, and having an emergency fund is crucial for managing them without financial strain. As early as now, aim to save at least three to six months’ worth of living expenses. Keep this in a separate account that you can access in times of need. This can help you cover medical bills, essential car or home repairs, or even a sudden job loss.
Building an emergency fund takes time, so don’t feel pressured to save it all at once. You can start by setting aside a small portion of each paycheck and increasing it as your salary grows.
4) Invest in Your Future and Put Your Money Where It Can Grow
While retirement may seem far away, investing in your future now will pay off in the long run. Consider opening a retirement account early on and contribute a portion of your salary to it each month. The earlier you start investing, the more you’ll benefit from compound interest where your money earns interest on both the initial amount and the interest it accumulates over time. This can make a significant difference when it comes to your financial security at a time in your life where you’ll be the most vulnerable.
5) Think of Your Future Goals and Start Saving Up for Them Now
Now that you have money of your own, it’s important to have clear financial goals to help guide your spending. These goals can range from short-term ones, like saving for a vacation or a new gadget, to long-term ones, such as buying a house or a car.
When you have a clear picture of what you want to achieve, it will be easier to allocate your money in ways that align with those goals. You can break these big goals down into actionable steps by figuring out how much you need to save each month to reach them. This will give your spending purpose and help you prioritize what truly matters to you.
6) Treat Yourself, But Make Sure to Do It Responsibly
Your first salary is something to celebrate, and it’s perfectly fine to treat yourself. However, be mindful of how much you’re spending on non-essential items. It’s easy to get carried away with the excitement of having disposable income, but you don’t want to blow through your entire paycheck in one go.
Choose something meaningful and within your budget, such as a nice dinner, a new piece of clothing, or a weekend getaway. Again, just make sure to resist the urge to go overboard.
7) Start Learning About Investments and Put Money into the Options That Suit You
Investing is one of the best ways to grow your wealth over time, and it’s never too early to start. If you’re new to investing, begin by learning about and pooling your money towards simple options like index funds or mutual funds, which spread your risk across a variety of assets. These are relatively safe, long-term investments that can offer steady returns.
You actually don’t need to have a lot of money to start investing. Many platforms allow you to begin with as little as PHP 5,000. Over time, as you become more familiar with the market, you can explore more advanced options.
8) Consider Getting a Health Insurance Plan for Yourself
If your employer doesn’t provide health coverage, you’ll need to look into purchasing your own plan. It may seem like an unnecessary cost for many young people, but having health insurance can save you from devastating medical bills in the event of an accident or illness. Getting one will protect both your health and your finances, in good times and in bad.
9) Donate or Give Back to the Causes That Matter to You
Using your first salary as an opportunity to give back can be an incredibly rewarding experience. Consider setting aside a small portion of your paycheck for a charity or cause you’re passionate about. This can be a local organization, an environmental initiative, or a social cause. Contributing to the well-being of others will allow you to build a sense of purpose and gratitude on top of helping you develop good financial habits.
There are a lot of ways you can manage the money that comes from your first salary, and a lot of things you can spend on. But wherever the money eventually goes, make sure to maintain your budget, address your outstanding debts, save your money, and look into investing. The tips above should help you balance treating yourself and making practical financial decisions that will allow you not only to live for today but also prepare for tomorrow.
