Foreigner's Finances

Avoiding the Desire to Spend the First Paycheck

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Last week was a momentous occasion in my “adult life” as I received my first paycheck as a salaried employee in my first job out of college. My previous job was an hourly rate and the amount of hours fluctuated drastically from one week to the next. This created a lot of unnecessary worry and wasted thought as I was constantly wondering how much my next paycheck was going to be.

It was also a huge pain for budgeting and savings. I didn’t have many monthly bills like water, gas, or rent, but I could never settle on a set percentage for savings because of the paycheck fluctuations. I would wind up looking at my bank account the day I got paid, and just choosing a random amount to put in my savings account.

With the salaried paycheck, every month’s pay will be the exact same. Once I figure out my spending next month and create a savings plan, life will be a breeze and I’ll be able to concentrate my efforts on more important things than arbitrary worries about paychecks and savings percentages.

Everyone handles their money differently, but I’ve been surprised at the way I’ve seen my peers react to getting their first paycheck. Around 70% of the teachers are just out of college so we are all going through the transition to adulthood and receiving a salary for the first time together. However, many are treating their first paycheck like a windfall or a winning lottery ticket. Instead of paying off debts or just saving the money, many were planning shopping trips and listing off the items they were going to buy once they got paid. I’d like to think this is just a reaction to receiving the first paycheck, but this spending behavior will likely continue every month the paycheck arrives.

The process for many young people seems to be spend first and hope the money lasts the entire month. If it does, then they are ahead and can save a little, or just buy more the next month. This behavior will be do alright until an emergency or unexpected expense, like needing a new suit for a job or having to get your car fixed, comes about.

I believe in celebrating the first adult paycheck and treating yourself within reason. I’ve been meaning to pick up a nice pair of headphones as my bud headphones are no longer cutting it in the sound quality category. As soon as I find a pair I like, I’m buying them. Enjoy your money; you’ve worked hard for it. But by putting other debts aside and refusing to save money, people slowly begin to dig themselves into a financial hole. It’s difficult, time-consuming, and costly to play catch up with your finances.

Things to do with your first paycheck

Celebrate by buying the dress or shirt you’ve been seeing, or take your girlfriend/boyfriend out for a nice dinner. You’ve worked hard to put yourself in this position so enjoy it. The minute you strangle your money by not allowing yourself to spend on the things you like, is the minute you’ll fall back into poor money habits. Live a little, but realize you’re going to probably live a while, so you might want to save a little for later, too.
That’s it. The best way to treat payday is to pretend it didn’t happen. Your spending habits should not drastically change as soon as the paycheck arrives. Instead, by slowly putting money away you will begin to build up some savings and you can start saving for specific goals – new iPod or car - instead of only being able to spend when you get paid. It’s a great feeling to be in control of your money and savings, instead of having to wait for your employer to deposit your paycheck every month or two weeks.

Receiving that first paycheck is exciting for everyone, but do yourself a favor by keeping the celebratory purchases to a minimum. You’re credit card and savings account will appreciate it.