MONEY TALKS: What do you do with your salary?
What do you do when you get your paycheck? Earning your salary might provide you with an exhilarating feeling of your efforts finally paying off. The first salary and the message that is accredited to your bank account is an exceptional and satisfying feeling for anyone who has just started earning.
For those who have been in the workspace for some minute, PAYDAY is always a good day! Don't you just want to grab that lunch, drink or that dress you screenshot off Instagram? Well while there is nothing wrong with all this because you worked hard all month and you deserve it.
Whether it's your first salary or not, the level of excitement is still the same and while you always have an idea of what you are going to do with your money, you often feel like there are things left out and you actually never buy or do what you had initially intended to do. To guarantee a win, it's important that you create a money routine that will keep you financially fit in the long term. Avoid the financial treadmill by all means.
One way of avoiding the treadmill is by making sure you’re heading true ‘East’ on your wealth compass. The Wealth Compass is a metaphor that Cause Capitalist Steve Down uses to conceptualize human spending. He highlights this intriguing concept in his book, Financially Fit for Life.
Each compass point can show you where your salary goes.
West spending, is the money we spend towards instant gratification: the furniture, the high-end accessory, dress or a new vehicle. Whilst there is absolutely nothing wrong with spending your money on these things, it's important we know that money spent on this area is depreciating in value.
South spending is the money used on repetitive purchases on everyday essentials such as food clothes, rent, water and electricity. They expand and may equally exceed your income level if not cautiously looked upon and more of your income raise maybe lead to arise in demand. (more salary, bigger house?)
North spending is money used on financial daily leaks which are driven by impulse or influenced by indulgence. such as take outs, fast food deliveries and door to door delivery fees. All this may seem harmless besides its just a few coins but given the time, the amount used on North spending could be significantly a huge amount.
East. East dictates that money is spent on assets that appreciate in value.
Now that you know how and where your money goes, here are steps to help you make better choices.
- Budget, First Review your spending the previous month, if it's your first paycheck, Create an actual budget for the paycheck you just received. Ensure the budget includes savings, debt repayments and spending.
- Pay yourself first, take out a minimum of 10% of your income and save that into an emergency fund and/or retirement fund.
- Pay down your debt, put away funds for debt repayments that are due. Do not wait
- Pay those bills, prioritize your bills between needs and wants and make early payments on all the mandatory expenses. Pay them on time, don't wait
- Plan for the rest of the wants enjoys the rest of the money freely. Take care of your wants and remember to stay on budget lest you find yourself in debt.