How NOT to spend your first paycheckHampton Wealth
You just received your first paycheck. As you’re staring at the new balance in your bank account, you mentally pat yourself on the back for a job well done.
Surviving, and even flourishing, after one month in your first job feels like such an accomplishment. You are officially an adult now. You worked hard for this money and you earned it.
Immediately your brain runs through a million and one ways you’re going to spend that moolah.
You’ve got to reward yourself! It’s only right.
Or is it..?
While the newfound financial freedom may seem exhilarating and the spending opportunities appear to be infinite because it’s YOUR money, it probably won’t take too long for you to realize that the money in your bank account is a very finite resource.
So here’s a list of things that you shouldn’t be spending your hard-earned money on. Yet.
A brand new car
You’ve been dreaming about that Porsche since you were 7, sitting in your dad’s trusty Toyota, watching the gleaming, red sports car zoom past.
You’re still a far cry from your goal of actually owning one, but for now, you’ll settle for the next best thing… a brand new coupe.
The salesperson has you convinced that you can afford it if you take out the 9 year loan. As he shows you the calculation based on your salary, you’re brimming with glee. You CAN afford it!
But what the salesperson has forgotten to factor in are the maintenance costs of owning a car:
- Road tax
- Maintenance & repair
- Parking & toll
Add to that the fact that a car, even though an asset, depreciates in value the moment you receive the keys from the car dealer.
The trusty sedan your parents bought you, however, has been completely paid for, i.e. zero monthly installment. Now that’s a real asset.
An expensive vacation
You made a pact with your buddies that as soon as everyone received their first paycheck, you would all go for a weekend vacation on that beautiful island off the coast of Sabah.
For the first time, you would get to pay for everything out of your own pocket and not have to explain to your parents why it costs $500 for your room at the exclusive resort.
Looking at the photos of the resort and its facilities, you’re convinced that it’s all worth it. It was going to be the best weekend of your life so far. Sun, sea and good friends celebrating life together.
What’s a little splurge now and then? YOLO.
But can you really afford the other parts of the vacation after you’ve paid for the room?
- Unless you are currently residing in Sabah, how much are the air tickets going to cost to fly there from where you are?
- Are 3 meals part of the package? If not, how much is it going to cost to eat at the restaurant?
- Are you going to drink at the bar? How much will each drink cost?
- Is chatting with your friends all day going to be enough entertainment? If not, what forms of entertainment are available and how much would you need to pay for them?
YOLO and all aside, if the trip is going to cost you a hand and a foot, it will probably be your last one in a while.
The latest gaming console
The last console your parents bought you was many years ago for your 18th birthday. And it had weathered many nights with you and your friends as you fought to defeat enemies and win battle after epic battle.
But now the latest game console is out in the market. Reviews are saying that it’s a whole new gaming experience and you see everyone around you showing off their latest buy on social media.
Your friends are waiting for you to get yours and you can’t wait to get in on the action.
So what if you have to survive on instant noodles for the rest of the month? You won’t have time to eat anyway. You will be too engrossed in gaming.
But have you forgotten the other costs involved if you really want that ‘whole new gaming experience’?
- How much is each title going to cost to buy?
- Do you need to pay for membership if you want multiplayer features?
- What about extra controllers? Surely it’s more fun to have friends over to play?
As you are mulling over these questions, also think about how often you’re going to get to use that console now that you have a full-time job.
“I was too busy gaming” doesn’t sound like a valid reason to give your boss for being late to work.
As an adult with a newfound spending power, what better way to announce it to the world than through a tattoo?
You know that your parents would never let you hear the end of it, but you don’t care.
You are using YOUR money on YOUR body and you will do whatever you want.
This includes getting that dragon or butterfly inked onto your arm/ shoulder/ back.
And since this is going to be your first time, it only makes sense to get it from the best tattoo artist in town. You’ll be assured of hygiene and safety, and they will be less likely to screw it up.
But are you prepared to fork out $200 for your tattoo?
Hours of pain aside, is that dragon or butterfly really what you want to have imprinted on your body for the rest of your life?
Because if you change your mind somewhere down the road, the only way you can have it removed is if you spend another hundreds of dollars on laser treatment.
Getting a badge to signify your transition into adulthood is understandable. But how about a piece of jewelry instead?
Eating out at expensive restaurants every meal
At lunchtime, you see your colleagues eating at restaurants where the average price of a meal is $15.
As a student, you didn’t have to think twice about spending that amount on a meal with the allowance your parents were giving you every month.
And now that you’re earning your own money, it only makes sense that you should treat yourself to a good meal after a hard day at work.
That also goes for the cup of coffee that you grab on your way to work in the mornings. You NEED the caffeine if you are to perform at your best. Besides, it’s only $3 a cup.
But doing a quick calculation of your food & drink expenses will tell you that in a month, you are spending:
- $15 x 20 = $300 for lunch
- $3 x 20 = $60 for coffee
If, instead, you went somewhere else for lunch that only charged $10 a meal, and brought coffee from home, you’d be saving up to $160 a month.
That may not seem like a lot of money, but in a year, you’d have an extra $1920 in the bank.
If you’ve been keeping track, that’s almost TWO island vacations with your buddies. So why not try out delayed gratification for a change?
Whatever it is you choose to do with your money, make sure it’s the right choice in the long-term.
Without proper planning and budgeting, it’s easy to spiral out of control and land yourself in a whole lot of debt. Having to starve yourself for most of the month while waiting for your next paycheck to arrive is no fun and definitely not what an adult would do.
If you’d like to learn more about how you can budget wisely and plan for your future, give the advisors at Hampton Wealth Group a call. We’re more than happy to sit down for a chat, and some coffee.