Financial Blog

There’s nothing like your first paycheck. It’s new. It’s exciting. It marks a big change in your life as it comes with a unique sense of ownership–you can finally buy things you can call your own! You would want to celebrate, spend, and shop. And you should, but within reason.

A huge part of proper spending comes down to the difference between needing and wanting. A lot of wants can be sneakily justified into a need and this is where you should draw the line. You may have tried to convince yourself with something along the lines of:

“I can get more work done with a new laptop” or “I could be more productive if I had an iPad!”

You may be right but this kind of logic is a slippery slope, and it could get out of hand quickly. Better spend your first salary on working-life essentials like new office clothes, the down payment on your apartment, a new coffee mug, or maybe on these smart financial moves that can benefit you in the long run.

There’s a difference between your gross pay (which is shown on your contract) and your net pay, and by the time you get your first paycheck, you’ll have learned the difference. You may be in for a reality check though. Aside from the standard withholding tax (that ranges from 12-32% depending on your gross pay), there’s what we call the contribution trinity: SSS, Philhealth, and PAG-IBIG.

For example, if you make P20,000 a month, you’re taking home only around P16,400 or around P8,200 every payroll cycle. Once you come to terms with how much you actually get, it’s also important to be aware of how much you spend to, you know, live. Then you can take what’s left, if there’s any, and do the following:

Like it or not, you should be saving a portion of your income every month and your first pay check is no exception. Once you establish your cash inflow and outflow, calculate the amount you can afford to put in a savings account and set up an automatic debit with your bank.

It’s also important to get a savings account with a high interest rate, a low opening balance, and a maintaining balance that fits your lifestyle. You can also take advantage of accounts that give bonus interest rates when you don’t withdraw for a certain period. This is a good way to discourage yourself from chipping away at your savings and to get good yield from high interest payments.

The best time to start an investment portfolio is on your first major influx of cash, which for most, is the first pay check. You’ve probably heard or read this a thousand times before but when it comes to investing, the earlier you get in the better. Starting out, it’s a good idea to try UITFs. You can put your investments in the hands of industry experts while getting good returns from a naturally diversified portfolio. It’s a good training ground for managing risk and returns as you prepare to explore other investment options like actual stock trading, mutual funds, or VULs.

It pays to be vigilant though as there are a lot of fraudulent investment companies that take advantage of newbie investors.

Let’s face it, you are going to splurge your first paycheck and that’s not necessarily a bad thing. Take your parents out for dinner, go on a date, throw a party; it’s definitely rewarding to put your finances on a back burner for a night and enjoy yourself.

If you do plan to spend a lot with your first salary, make sure to spend it efficiently. If you have a credit card, you can enjoy a plethora of rewards, promos, and discounts with selected merchants. Don’t have a credit card yet? Click here to apply.

However, you should remember that you just found yourself a job. You probably started just a couple of weeks ago. Now is not the time to spend big bucks on a vacation or make big ticket purchases that will take months of instalments to pay. It may be better to hold off until you’re settled in at work. Once you establish your saving and investing habits, knowing what to do with your paycheck will be second nature.