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What to do with your first paycheck

Receiving your first paycheck is always an exciting moment – a veritable certificate of independence and a sign that you are on your way to being a productive member of society. And beyond what it signifies, that first check holds value – literally, monetary value! So the question now is, how will you use it?

Here are some tips for how to make best use of your first paycheck.

To celebrate or not to celebrate

For many young workers, the first instinct is to spend that first paycheck on a gift to yourself, maybe a night out with your friends – something to celebrate. "I think it's fine to celebrate and treat yourself with your first paycheck, says David T. Waring, editor at fitsmallbusiness.com. "My best tip for new workers experiencing a steady income for the first time is not to increase their lifestyle too quickly. Once a new and more expensive lifestyle becomes the norm for you it will be very difficult to go backwards if you ever need to. Too many people don't consider this and basically live paycheck to paycheck."

Living beyond your means is a quick way to financial trouble – regardless of how much you're making. "When I was in my 20's I was making 6 figures and spending pretty much every penny of it on a fancy apartment, wardrobe etc," Waring adds. Understanding the value of money and how to properly manage it become vital skills once you start earning a steady paycheck.

Plan of action

Receiving your first paycheck can feel more like winning the lottery or getting a big birthday card from your grandparents. When you're not yet used to a steady income, you may find yourself looking for ways to spend this sudden influx.

"My advice for first paychecks is similar to my advice for windfalls (inheritances, bonuses, etc.)," says Kate Horrell, finance coach and blogger at KateHorrell.com. "Have a plan that acknowledges that it is special, by including a small amount for a splurge, and then do sensible things with the rest, including a portion for savings, retirement, and debt re-payment (if you have debt)."

Big picture

We live in a world where instant gratification is the norm, which can make it even more difficult to hold off spending and save for something down the line. Treating yourself doesn't have to happen on payday – in fact, saving up for a larger goal over the course of several months, or even years, is often much more rewarding.

"It's okay to treat yourself as it helps boost morale and motivation for earning even more in the future," says Michael Lan, senior resume consultant at Resume Writer Direct. "For new workers who are already experiencing a steady income, consider putting a certain percentage of your monthly income into a savings account for future investment or other purposes such as going overseas for a vacation!"

Long-term savings

If there's one piece of advice that young workers are probably sick of hearing, it's to start saving their money early. But just because it's stereotypical financial advice doesn't make it any less valid.

"One of the things that behavioral economists have learned over the years is how the very first paycheck creates an anchor for how people will spend and save for the rest of their lives," says Diane Garnick, CEO of Clear Alternatives. "The very first paycheck is the best time to begin saving for retirement. Putting 10 percent of that first paycheck into a retirement savings account could resolved and shortening the amount of time you need to work over a lifetime and improving your quality of life in your golden years."

To ensure good savings habits, Garnick suggests setting savings goals in terms of percentages rather than dollar amounts. "Saving $100 today will not be nearly as significant as saving $100 in 15 years from now. Conversely, saving 10 percent of your paycheck today and saving 10 percent of your paycheck 15 years from now can make a tremendous difference, since your paycheck is likely to get larger over time," says Garnick. "By allocating a percentage of your very first paycheck, you can easily make a commitment to saving that percentage from each paycheck over the course of your working life time."

Your first paycheck is an opportunity to enjoy a quick spending-spree, to start saving up for a future trip or big purchase, to lay the foundation for long-term financial security – but ideally it's an opportunity to prove to yourself that, with a little planning and self-control, it's possible to do all three.