Bills vs. Thrill: Making your first salary count
Getting that first salary can be both invigorating and scary. Invigorating because you feel all is right with the world..
Getting that first salary can be both invigorating and scary.
Invigorating because you feel all is right with the world, you have been rewarded for doing your job. Scary because it means the fact that you have some adulting to do. In most cases, the vigor outweighs the fear, and we end up spending all our money on things we may not need or things that would hold no value for us in the future.
The truth is, how you spend your salary the first time sets a precedent to subsequent paydays, and later down the road, you may have to reverse years of damage that this first instance created. Fortunately, this information age has brought with it an eagerness to at least consider options external to our purview.
So, we will look at five ways in which you can spend your first salary.
- Have fun can set aside (at most) 20% to celebrate your achievement. The part about adulting that no one seems to underscore enough is the having fun part. We get so weighed down worrying about our responsibilities that we forget just to enjoy ourselves.
It is part of the process, and it’s continuous. Once we accept that, we will not overspend on the fun in the beginning. - Pay up your debts: Going into your first paying job, you probably have to incur some expenses on clothes, shoes, commute to and from work, meals, etc. This would mean that you ask for help from your support system with a promise to pay. Paying your debts is an important tool. It instills discipline early on and helps you get into the right money mindset. You also need to consider other external debts that you may have, such as HELB, and draw out a plan where you can comfortably pay it down over time.
- Invest: Accumulating wealth while young makes all the difference because of the superpower of compounding. Compounding is akin to planting one seed that bears multiple fruits. Its incubator is time, you grow wealth if you start now than when you start a year from now. The best part about investing is that you do not have to start big, you can start small and build on overtime. For instance, you can invest in a money market fund, where you will earn a return, passively. This is better than having your cash sit in a current/salary account.
- Save it: The ideal position is this; savings complement your investments; they are not substitutes. However, it is normal to feel some angst about investing at first, so you can start with saving. There are so many rules of thumb when it comes to what portion of your salary to save. My recommendation is that if your expenses are less than 50% of your salary, you should save at least 50%. Why? As you progress into adulthood, your expenses increase (rent & utility expenses, then a baby comes along, etc) thus, your disposition to save is reduced, and you may never get to a chance to save 50% of your salary again. You can start on your saving journey by joining a sacco. They provide great rates on savings as well as loans, which you may need to acquire some investment property.
- Donate it: If you had the opportunity to make a difference in someone’s life, would you take it up? There are varied ways to do it; tithing, buying foodstuffs, toys, and household items, contributing to someone’s plea for medical care are just but a few. You can define the cause you want to support and the amount you wish to contribute. The recommendation is to apportion whatever portion you feel comfortable with, and that supports your beliefs.
Let us change our mindsets about the first salary. It does not have to be spent on fun only and other people. It’s a time to reflect on your future and make decisions that will augment your value decades from today.