Receiving your first paycheck is a significant life moment for almost everyone. Your first salary check signifies not just income earned on your own but also a sense of independence. However, this exciting feeling of autonomy is accompanied by a sense of responsibility and accountability. Since you know how hard you have worked to earn this paycheck, you must ensure it’s used correctly. This article offers a guide on the 7 must-do things with your salary to offer guidance on how you can better utilise your hard-earned funds to create a stable financial future and still enjoy your life.

• Prioritise debt payments to boost your credit score and financial health.
• Establish an emergency fund and get insured to remain prepared for all unforeseen events.
• Invest early to tap into the power of compounding and achieve your goals faster.
• Travel and spend on indulgences to rewind and enjoy your hard-earned money.

Here’s a list of 7 must-do things with your salary:
 

Clear-off debts

Once you start earning, you must prioritise debt repayment. One of the must-do things with your salary is dedicating a set portion of your income to a comprehensive debt repayment plan. Ideally, you should start with high-interest debts like credit card dues and personal loans. For instance, try allocating a portion of your salary to repay your monthly credit card dues in full to avoid paying the high interest charges associated with minimum payments. Similarly, if you have outstanding student loans, prioritise repaying them to reduce the financial strain and interest accumulation. Clearing off your debts helps eventually free up funds for savings and investments while also boosting your credit score.

Build an emergency fund

Emergencies are unpredictable, and the future is uncertain for all of us. The best way to tackle the unforeseen is to remain prepared. Therefore, setting aside a fixed sum for an emergency fund should be added to the list of things you must do with your salary. Having access to a liquid emergency reserve can come in handy when you are dealing with urgent cash flow constraints. Whether matters are as small as replacing your laptop or as big as clearing urgent medical bills, your emergency fund helps you stay prepared for all unforeseen events, regardless of their scale.

Invest in health and life insurance

Health and life insurance investments come next on the list of the 7 must-do things with your salary. Getting adequately insured early on is essential for every young adult. While you are young today, tomorrow is not promised. With rising medical expenses, it is almost impossible to foot medical bills out of your own pocket. That’s why you need to invest in a health insurance plan as soon as you get your first salary (if your employer doesn’t already provide one). Apart from health insurance, you should also consider investing in life insurance plans early to lock in low premiums and keep your loved ones financially secured for the future.

Start investing

This must-do thing with your salary should be a no-brainer for most. Investing early is the key to systematic wealth creation. As a young investor, you can reap the benefits of compounding better since investing early increases the period of the investment. This, in turn, helps you ride out periods of market volatility to ensure good returns. Moreover, since you have a long investment horizon, you can afford to invest a significant portion of your portfolio in riskier investment avenues like equities. While all this is true, as a young investor, you must also understand the value of diversification. You should allocate your salary in a way that allows you to build a diversified portfolio with investments in different assets that offer risk-balanced returns.

Travel

Apart from using your salary to ensure fiscal responsibility, you should also use it to plan trips and travel. By exploring the world, you get to meet new cultures, broaden your perspective, and learn life lessons. You cannot have such tangible experiences by sitting at home or in a cubicle. Save funds from your monthly salary and use your annual leaves to travel. This will not just help you break through the monotonous routine of corporate life but also have new and exciting experiences.
 

Be philanthropic

Another must-do thing with your salary might be dedicating a part of it to philanthropic endeavours. You can start small and donate funds to a local old age home or animal shelter. Alternatively, you can find charities that work for causes dear to you and make directed donations. Philanthropic acts help you leverage your privileged independence to make life a little better for others. Even if you cannot contribute every month, try incorporating this goal on your must-do things list.

Spend on indulgences

When you first start earning as a young adult, all you can think of is splurging on indulgences. While doing so regularly is not wise, you can let loose once in a while. An even better approach is allocating a fixed sum towards indulgences every month from your salary. This way, you can eat at a fancy restaurant, plan a weekend getaway, or buy that dress you’ve always wanted guilt-free. Capping your indulgence spends with a fixed allotted sum will help you stay within your budgetary limits. 

Managing your salary every month can become easy with a little planning and budgeting. By understanding how to allocate your income, plan for emergencies, cap expenses, and prioritise spending, you can live a comfortable and worry-free life.