What you should know about your first salary

What you should know about your first salary (Photo: iStock)

The first paycheck often brings a lot of excitement, as it signifies independence. This, family obligations and societal expectations can also make many people rush into spending.

Personal financial advisor Sophia Achieng says that if you are coming from a background where money is tight, there is a strong urge to change your lifestyle.

Once you receive your first earnings, she advises understanding a pay slip. Before spending anything, you should clearly understand deductions and confirm the net pay.

“Look at your payslip critically and get to know what deductions have been made,” she says.

She also advises pausing before spending by understanding your net income, that is, what you get after deductions. Equally important, she says, is knowing your employment contract in detail, such as allowances, medical cover, bonuses, salary review timelines, transport, and insurance.

This helps people advocate for themselves more effectively. She encourages new employees not to shy away from negotiation.

“People have this fear that if you negotiate, you will not be hired, which should not be the case. You should be firm enough and negotiate respectfully. If the salary is fixed, look to see if the benefits are flexible,” she says.

Once you have earned your salary, Sophia suggests giving your money a purpose by setting up a plan.  She recommends dividing income before it arrives with the 50/30/20 rule based on net income. The 50 per cent goes towards needs, 30 per cent for wants, and 20 per cent for savings.

“While people can adapt this to their own needs, the most important thing here is being consistent,” she says.

Savings, she says, should not wait for a higher income. Even small amounts should be set aside, preferably in a separate account, to begin building an emergency fund, for instance, through a money market fund.

Sophia highlights that one of the most common mistakes new earners make is spending quickly to look employed. She says that small, seemingly harmless expenses, such as new clothes, frequent outings, and convenient purchases, can significantly impact your wallet.

While the desire to upgrade your appearance or lifestyle is natural, she emphasises starting with paying yourself first by saving. She urges first-time earners to avoid upgrading everything at once, adding that lifestyle growth should be gradual, matched with increasing savings.

“Ask yourself whether how you are spending aligns with your dreams. Being able to account for how the first paycheck was used builds confidence and a sense of control,” she says.

Emergency funds and insurance are seen as unrealistic for beginners, but she says that you don’t need a lot of money to start. Insurance, especially medical and basic accident cover, protects your financial progress.

Before the second paycheck arrives, she advises accounting for every shilling spent, creating a simple budget, automating savings, and setting healthy boundaries.

“The first paycheck can help us build habits that last. It is just as important as the last one you will be paid when you leave the job,” she says.