What to do with your first salary?

After years of relying on your parents for an allowance to maintain your lifestyle, earning your first paycheck could give you the exhilarating feeling of finally being an adult. You can now spend your hard-earned money on whatever you want without being accountable to your parents.

Unfortunately, being a working adult usually also means having to be more responsible and conscientious about what you spend your monthly salary on. Just because you have this newfound freedom to buy more stuff doesn't mean you should spend more freely.

Before you start splurging on expensive clothes, fancy cars, gourmet coffee and expensive avocado toast, here are seven things you should consider. plan with your first salary. But before you start, here is a premium guide that gives you the best advice to help you better manage your personal finances.

7 things to do with your first salary

To enable you to take advantage of your first salary and achieve your financial freedom, I have listed 07 things to do with your first salary.

#1 Build your own emergency savings

With your first salary, you can first build up an emergency savings. From a young age, you've been told it's important to save for a rainy day. Being an adult means having to put this into practice.

You need emergency savings which you can take advantage of whenever life decides to throw you a curve ball. It can be a minor but annoying issue, like replacing your washing machine. It could also be something serious, like requiring urgent medical treatment on short notice.

If you have savings to weather such crises, it saves you unnecessary stress, borrowing money or going into debt to pay for these unexpected costs.

A good amount to aim for would be to put side six to nine months of your average monthly expenses. It also ensures that you have enough savings for you and your family to continue living your current lifestyle, even if you lose your job and have to start looking for another one.

#2 Erase or reduce your debt

The second thing to do with your first paycheck is to reduce or clear your debts. As you increase your savings, you should at the same time examine the debt you have accumulated and need to repay.

At this point, the student loan is a current debt that you may have incurred during your studies. Payment for these loans usually begins once you graduate and can take several years to clear.

Not all debt is created equal, with some being heavier than others. For example, the debt of credit card tends to result in higher interest rates of more than 24 percent per year, which are unsustainable if allowed to snowball. Pay off those debts first, as they could ruin you financially.

Calculate the monthly repayments you need to make for all your debts and set that money aside each month to make sure you don't default on payments and incur additional interest charges. If you have excess savings, you may consider partially or fully repaying your loans at high interest.

#3 Understand your insurance needs

The third thing to do with your first paycheck is to understand your insurance needs. Having the right insurance for your youth is one of the most important elements of successful financial planning. You need to start thinking about your own insurance needs as soon as you start earning a salary.

At this point in your life, the greatest asset you have as a young adult is your ability to work and improve your career in the years to come.

It is also the biggest risk factor you face, as unexpected health problems or an unfortunate accident can rob you of your ability to work and support your family. This is the harsh reality of life.

To protect against this risk, you should consider purchasing appropriate health and life insurance policies to meet your needs. Common insurance products to consider at this point include a private wrap-up plan, critical illness cover, disability income cover, and life insurance.

#4 Start investing

Another thing to do with your first salary is the investment. It is essential to start as early as possible. This is due to the power of compound interest, where investors can earn interest not only on their initial investment, but also on the interest they have earned in previous years.

Investing early also gives your investments more time to weather the ups and downs of the financial markets, which can be volatile.

This is particularly important if you invest in riskier asset classes such as equities, where it is more common to see markets fluctuate from time to time due to unexpected macroeconomic factors.

To further reduce your risk, remember to adopt a diversified approach during the investment. This means dividing your investment dollars into different asset classes that are uncorrelated, where price movements in one investment do not affect another, or even negatively correlated, where price movements in one investment move usually in the opposite direction of another, whenever possible.

It helps if one asset is not performing well because there are other assets in your portfolio that could help cover the loss.

#5 Send a token of gratitude to those who have helped you

Once your first salary is in your pocket, you can gratify all those who supported you during your difficult times. Often, we get so caught up in the excitement of a new job and all the other new things that come with it, that we forget about the people who, directly or indirectly, helped us get there.

People who told you about a job, people who referred you, or simply someone who guided you through your job search.

Although all it takes is a “ please » free or a personal note to remember these people and thank them, it is very special if you can send them a personalized thank you gift which could be sweets, chocolates, a gift or simply a dinner treat.

#6 Invest in life and health insurance

Even if your company provides both of these, investing in a good policy is a good idea because it will not only protect you against any sudden medical emergencies, but will also help you save tax at the end of the year.

Many young people complain about paying high taxes, but realize that they could have minimized the amount of taxes by planning their investments from the start.

It is best to purchase an insurance policy as early as possible to enjoy the most benefits. Also, generally, the younger you are, the less health insurance premium you pay.

#7 Your high-priced items

You'll quickly find that adulthood is filled with big-ticket items you need to save on. Some of them will cost upwards of tens of thousands of dollars and require you to start saving diligently now.

If you anticipate needing $30 000 for the renovation of your house in two years, it means that you have to save $15 000 per year, approximately $1 250 per month. This calculation also only works if you start saving today.

You might end up with several big ticket items you need to save on, but not enough savings each month. You need to start prioritizing your needs and thinking about what's most important to you.

For example, if you splurge $30 for your wedding, or if that amount needs to go toward paying for your home renovation.

It is also important to differentiate between needs and wants. A year-end holiday that costs $10 is less of a need than the down payment for a house and a roof over your head.

Only after budgeting for essential costs should you think about luxuries or anything frivolous that you would like to spend your salary on each month.

In summary…..atrust in life

After more than a decade of training, starting life in the working world can be daunting. To take on your new responsibilities and prepare for what the future holds, you need to be diligent from the moment you start getting your first paycheck.

This includes building up your savings, reducing high-interest debt, understanding insurance and investing, and setting aside money for important expenses such as weddings and home renovations that everyone will go through in their lifetime.

By understanding what you should do to strengthen your financial health, you can live life with more confidence and enjoy greater peace of mind? This will help you achieve your financial freedom.

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