Budgeting with Your First Paycheck

Ask most seasoned workers if they can remember the exhilarating feeling of receiving their very first paycheck, and that bliss will be painted all over their faces. Some may conjure up crazy stories about spending the whole lot on a motorbike, but if you asked for advice, most would hit you with three important words – start saving now.

As a student, you’re probably tired of analysing pie charts, so let’s use pizza. If your month’s salary was a pizza, how many pieces should you be cutting it into and how big should each piece be?

Here are three important pieces to make as big as possible:

  • Paying off debt

Student loans and credit card debt are hungry, pizza guzzlers. The bigger the pieces you feed them, the sooner they’ll be full, but feed them small pieces and you’ll be feeding them for years.

  • Savings

Don’t think that the last piece of pizza that’s left after you’ve allocated the rest is what you put into savings. You should start with a saving amount in mind, cut that piece first and then allocate what’s left to your other expenses. It’s the best way to save for your car, house or, as far away as it seems, your retirement.

  • Emergency fund

This is an amount that you put aside each month for the unexpected things that happen in life – it’s a safety net for that doctor’s bill or the new tyres your car needs. What’s nice is that if you have a year with no nasty surprises, you have a ready-made holiday fund.

Five more important pieces to keep as small as possible:

  • Rent

This could be a room in a house-share, a little place of your own or it might just mean offering your folks some cash for the room you still live in. Remember that this is a time in your life when you don’t need luxury accommodation and company is fun.

  • Transport

This piece is as big as how much it’s going to cost you to get to work and back each day – your bus or taxi fare or your petrol costs. Make this piece smaller by car-pooling or getting a bike.

  • Groceries

If you’re a self-catering student, you’ll have a good idea of what you spend on food and household items in a month. If you’re living at home or in a residence, get tips from some self-catering friends.

  • Phone

Take this opportunity to check you are on the lowest cost contract (especially if your parents have been paying your old one) or if pay-as-you-go will save you money.

  • Entertainment

Finally, the fun stuff. As a student, you’re probably very practiced at hanging out with friends in a budget-friendly way. Hang on to those good old habits but celebrate your financial independence too. Make sure there’s a piece of pizza big enough to let you go out for dinner, see a movie or add an item to your wardrobe each month – you do deserve a small treat now and then.

Installing good financial habits now should see you stable and smiling in your early 30s, while those less masterful at dividing the pizza will be left wondering how you did it.

Sources:

https://www.monster.com/career-advice/article/how-to-budget-first-paycheck

http://www.sacfcu.com/blog/first-paycheck-budget/

https://www.huffingtonpost.com/gobankingrates/heres-the-first-thing-you_b_5792936.html

Choosing the right medical aid is no joke, but we’ll leave you smiling.