From paycheck to prosperity: What to do with your first paycheck

Receiving your first paycheck is a significant milestone which symbolizes the beginning of financial independence and taking control of own finances. However, it can be challenging to know how to manage your money effectively, especially if you're new to the workforce. Some people might be overwhelmed with the initial responsibility of handling finances as a newbie, but making smart financial decisions does not necessarily only come with age; you can start early! Listed below are some recommendations on what you can do to make the most of your first paycheck.

Start an emergency fund

Having emergency savings is needed when things go south and you require immediate funds to cover the expenses. The cruciality of prioritising your emergency fund should be a monthly occurrence, starting with your first paycheck. Set aside a goal to be accomplished. As you progress in your savings, you can aim to establish reserved funds that can last you for up to 6 months worth of living expenses. Consider investing into an insurance coverage like Great Eastern Malaysia's Wealth Accumulation Plan to secure your financial future and protect yourself from unforeseen circumstances. Contact Great Eastern Malaysia to learn more about how you can start building your emergency fund today!

Start budgeting 

Budgeting can truly teach you the value of money, and eventually you will develop ideas to cut corners financially to meet your budget goals, which isn't necessarily a bad thing. Think of it this way: you can opt in to purchase cheaper goods if they fall under the category of wants instead of needs. Budgeting can also help you keep track of your expenses and allocate your salary accordingly. List down the important bills to pay, such as rent, utilities, and transportation. Once that is settled, you can work your way up by setting aside funds meant for groceries and shopping. The last thing on the list should be entertainment-related expenses. Be sure to take advantage of budgeting tools such as mobile apps or even a more traditional pen and paper method, depending on your preference.

Settle your debts 

Settling your debts becomes a lot easier once you have worked out the calculations. You can perhaps pay your designated debts every two months, depending on the cost, as long as you start early. You can start by making a list of all your owed debts, which might consist of student loans, credit card balances, et cetera. From there, formulate a list from the highest-interest-rate debts to the lowest. It is recommended to pay the smallest balanced debts first to gain some momentum, then you can work your way up. Consider automating your funds towards your debts if possible to ensure that you don't miss any payments and are consistently making progress towards becoming debt-free.

Remember to prioritise your needs and wants, think before making purchases, and settle any debts promptly. With these strategies in mind, you can use your first paycheck as a foundation for long-term financial success.

Reward yourself 

You can also allocate a portion of your first paycheck to celebrate your hard work and accomplishment. The first step is to decide what you wish to do with your ‘celebration money'. The ‘celebration money’ could be spent on a mini vacation, buying a reward for yourself, or spending it on family and friends. Once you have a plan established, set aside an amount you are comfortable spending. Regardless of your decision, it's still essential to keep in mind of your financial goals and responsibilities. Before splurging on a vacation or a new gadget, consider any upcoming bills or expenses you may have, such as rent, utilities, or student loans. Some who are new to money tend to make the mistake of spending most of their salary on 'celebration money' only to find themselves struggling to make ends meet for the rest of the month.