🌼10 Things You Must Do When You Get Paid(HIGHLY INSTRUCTIVE)
These steps will improve your financial health and help you reach financial freedom faster.
We all have different jobs with different payment schedules. Some of us get paid monthly, some weekly, some biweekly, and some on a more irregular schedule.
Regardless of where you fall in that spectrum, there are certain things you must do whenever you get paid if you want to become financially free.
Read also: 11 money rules for financial success
You should have a plan for every dollar (or your local currency) arriving in your bank account. Every dollar should have a purpose.
Depending on where you are in life, your priorities might be different. You might be saving up for a house or car. Or, maybe you are saving up for your child’s tuition. Or, maybe you are not there yet, and you are saving up for your upcoming marriage.
The point is, no matter what stage in life you are in right now, these 10 things can help you improve your financial health and reach much-coveted financial freedom.
Pay Off Your Credit Cards In Full
Never keep a credit card balance. Never. Like, absolutely never.
If you do, you will go down the rabbit hole of doing it over and over again, and become trapped in a compounding interest trap. In other words, you will become a credit card company’s favorite person. You don’t want to be a bank’s favorite customer!
Personally, I pay off my credit cards in full every Sunday during my weekly review. This also helps me stay up-to-date with my spending habits.
At the very least, if you don’t do it on a weekly basis, you should do it the moment you are paid.
While you are at it, also look at your credit card statement or budgeting app of choice to understand where your money is going.
Contribute To Your Savings Account
You must have a savings account.
In that account, you want to keep enough money to fund three to six months of your life, if you were to lose your primary income.
If you are there already, congrats! That’s a really big step!
If you are not, don’t fret. You will get there soon.
Have a fixed amount in mind that you want to contribute to your savings account every paycheck. It can be a certain percentage or a fixed dollar amount. Whatever it is, before doing anything else, transfer that amount into your savings account.
If a disaster happens and you lose your job, this will be your fallback. You don’t want to compromise on this.
Automated Investing In An Index Fund
One of the best ways to grow your wealth over time is by investing in the stock market and letting the magic of compound interest do its thing.
Time in the market beats timing the market. That’s a famous saving.
Get into the habit of buying some index fund stocks every time you get paid, regardless of market conditions. This is called DCA or Dollar Cost Averaging.
Find a few index funds that align with your values. Or, just invest some into something like VTI in the US which is the same as investing in the market.
Pre-Tax Stuff (401K, HSA)
If you are not in the United States, this might not apply to you.
Many countries, including the United States, have a retirement plan that you can contribute to with pre-tax dollars.
In layman’s terms, this means you put money into your retirement funds, and then the remaining is taxed. That means you are taxed less.
It’s wise to contribute 3% to 5% (or whatever works for you) to your retirement fund with pre-tax dollars.
Invest In Yourself
The best way to grow your income is by investing in yourself.
Learn new skills. Grow as a person. Start a side hustle. Start a business. Gain knowledge. Focus on yourself.
The more you invest in yourself, the more you will make in the future.
I would say this is one of the best investments you can make. Take that online course you always wanted to. Read that book you have been meaning to. Just learn and grow.
It doesn’t only have to be knowledge or business-related.
It can be related to your health too. Your physical health is one of the most important things to take care of. If you don’t have good health, you have nothing.
So go ahead and invest in a gym membership, yoga class, personal trainer, organic produce, or whatever you think will boost your physical and mental health.
Put Some Away For Any Big Purchase
It’s always wise to save up for any big purchase, rather than buying them impulsively.
If you buy things impulsively, most likely you will be moving money from your savings account to checking, or worse, selling some of your investments to fund your purchase.
That’s never a bright idea.
Instead, contribute some money from every paycheck into a “bucket” or account which will only have the money needed to fund that purchase.
By doing this, you make sure you don’t spend a huge chunk of your paycheck on one purchase while compromising on all the other necessities.
Give Some Away
This is going to be very dependent on your financial situation.
If you don’t have your emergency fund built up, don’t do this.
If you do have an emergency fund and have done all the above, consider giving some money away. You can either pick a charity of your choice or some organization or research related to a field you care about.
Personally, I give money to a non-profit organization that raises awareness on climate change and also donate to a charity that takes care of cancer patients.
It can be whatever you care about.
It can even be giving away money to friends and families who are not as fortunate.
I find it very rewarding. There is no better way to spend your money, than on helping others and the world.
Budget With The Rest
At this point, whatever you are left with, is your money to spend on rent, food, utilities, groceries, and other purchases.
Now you know exactly how much money you have to spend.
Open up your favorite budgeting app and get to work. You should divide the money evenly between different areas of your life. Budget the necessities first, then decide where else you want to spend that particular week or month.
Only Keep What You Need in Checking Account
Don’t keep all of the remainder in your checking account.
Just keep what’s necessary.
The problem is: if you keep all the money in your checking account, you will be forced into spending it. You will get the false sense that, just cause there is money in that account, it is meant to be spent.
That’s why it’s wise to keep the amount you need during the month according to your budgeting in the previous step. Then, add some buffer to give you some wiggle room. The rest, move to some savings account or investments.
Pay Taxes As You Go
Depending on your employment situation, your taxes might already be withheld from your paycheck.
If that’s the case, and you have no other income, you can skip this part.
If that’s not the case, however, try paying your taxes incrementally during the course of the year. This way you will avoid that one big lump sum tax that you have to pay during tax season.
It’s easier on the wallet and it will make your tax season significantly less stressful.
I hope you found this a valuable read and have some takeaways that you can go ahead and implement in your wonderful lives.
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CONTRIBUTED BY Irtiza Hafiz
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