Your paycheck from your new position or first summer job, or salary increase just hit your checking account, and you feel like you’ve hit the jackpot. This is the most money that you’ve ever made in your life!
What should you do now? Celebrate, for sure—but you’ll also want to do some thoughtful planning with your newfound wealth to make the most of the financial opportunity. Let’s get some advice from the experts.
Take it slow and see the big picture
Don’t rush any of your financial decisions. As long as you don’t spend it, the money will be there waiting for you. There’s no reason to hurry. “Resisting the immediate urge to upgrade your lifestyle will allow you to be deliberate in the execution of your financial plan,” says Samuel Lewis, founder of SJL Financial in Wilmington, Delaware.
Before you mentally spend (or sock away) all your cash, internalize this budgeting guideline, known as the 50/30/20 rule: 50% of your income goes to essential items such as rent, groceries, and monthly bills, 30% of your income goes to discretionary or non-essential items such as dinners out, concerts, and online streaming services, and 20% goes to savings.
Treat yourself
Credit: Reviewed / Getty Images / Khosrork
You’ve worked hard and now you afford to spend it, but remember to do so wisely.
Don’t hold back the excitement of landing a job with a big paycheck. You earned that money by working hard and should use some of it to celebrate. “If you don’t have fun along the way and only focus on earning and saving more, your money is controlling you—not the other way around,” says Elliott Appel, a financial planner and founder of Kindness Financial Planning based in Madison, Wisconsin.
Of course, you’ve probably daydreamed about all the different things you’d like to buy or do with your paycheck. But you’d be wise to rein yourself in by giving yourself an allowance. As already noted, a good rule of thumb is to cap your discretionary spending at no more than 30% of what you earned, after ensuring your essentials are handled. And if that value seems high, remember: You don’t have to spend it all.
Determine your priorities
Make a list of financial goals and then put them in order of importance. This simple but useful task will help you ascertain what’s most important to you financially. Think of it as filling buckets. “Basically, you take the amount of money to be deployed and fill up the first and most important goal or ‘bucket’ and the …….
Source: https://www.reviewed.com/money/features/how-handle-your-first-big-paycheck