Step-by-Step Guide on What to Do With Your First Paycheque: Building Long-Term Wealth

Congratulations! You've received your first paycheque. This is a big step from childhood into adulthood and you're bound to be excited. But what to do now? Spending it all on toys and games doesn't intuitively feel right, but neither does storing away 100% of it for the future. What is the right thing to do with the money you get from your paycheque? Don't worry. In this post, I go through 5 steps that you should take after receiving EVERY paycheque, which will allow you to both build long-term wealth AND have your fun. Here's a step-by-step guide on what to do with your first paycheque (and every paycheque afterwards.)


white staircase flight in spacious light hallway; What to Do With Your First Paycheque
What to Do With Your First Paycheque

Disclaimer: I am not a financial professional therefore please take my advice with a grain of salt. These are just the steps that I've seen works the best for people around me and make the most sense to me. They are also the steps that I myself am currently implementing. That being said, let's move on to the first one:

1. Pay Yourself First

The first step to take after receiving your paycheque should be to pay yourself first. Most people pay everyone else first, and at the end of the day, have no money left to pay themselves. They go around and pay the taxman, the utility company, their landlord, and then buy clothes to impressive other people, and then save whatever is left (usually not much.)

That is completely the wrong order. If you want to grow your wealth in the long-term, you need to start paying yourself first. As is implied above, paying yourself does not mean to buy gadgets, clothes, or games. Paying yourself means to set aside 10%-20% of your paycheque for investments. Specifically for investments that will generate cash for you in the long run.

An have an entire post on paying yourself first, as well as on investing, but for now, a few assets you can look into saving for are:

  • Dividend stocks
  • Rental real estate
  • Your own business

2. Pay Your Must-Need Bills

After you have taken 10%-20% of your paycheque and stored it away for buying assets, the next step is to pay your bills. This is going to vary from person to person as different people live different lives. For the student still living with their parents, this expense will be very small, but for the person living on their own in a big city, this expense might be gargantuan.

Either way, this is the step where you tally up all of your expenses for the month and pay them off with a chunk of your paycheque. This might look like:

  • Rent ($500)
  • Food ($300)
  • Gas ($100)
  • WiFi and Network Stuff ($100)

3. Hustle (Potentially)

At this point, you may be wondering to yourself “wait a minute, what if I don't have enough money to pay my ‘must-need' bills? Should I take money from the ‘pay myself first' category?” Nope. Do not touch the ‘pay yourself first' money. This step (hustle) is for if you can't pay up your must-need bills.

It's going to suck for a bit knowing that you have the money to pay your bills and are doing extra work, but that money that you paid yourself will work wonders in the long-run. What you CAN do is find different and creative ways to make up the money for your must-need bills. Here a few ideas:

  • Tutor on the side
  • Do affiliate marketing
  • Consult on a topic you know very well
  • Model
  • Do odd jobs (mow the lawn, shovel snow, etc.)

4. Build Your Emergency Fund

“Oh come on! We still don't get to have fun with our money???”

I know I know, but this is the last step before you can do whatever you want with your money. Having an emergency fund is crucial as you never know when something bad may happen in life. This could be a car accident, or losing your job, or a flood, or a fire. Whatever the case, you want to have enough money saved up that you don't have to worry about going into debt if an emergency strikes.

This typically means saving up around 3-6 months of your living expenses. Why 3-6 months? Because that's typically the amount of time it takes for one to find and settle down into a new job. Of course, you don't have to toss every single dollar left into your emergency fund until it's built up, but it's important to start setting aside a bit of money.

Ideally, you'll want to have this fund set up by the time you start living on your own. You can do the calculations on how you can get there based on your current income and expected living expense.

5. Do Whatever You Want

Congrats! After you've completed the above 4 steps, you can do whatever you want with the money!

Some people (like me) like to reinvest some of the remaining money. Others (also me) choose to spend it on food. And still, others decide to buy clothes or use the money to shop. Honestly, if you managed to invest 20% of your income, pay off your bills, and build an emergency fund, you are well on your way to financial freedom. So celebrate a little and do what you want with your money. (As long as it's within the confines of the law of course).


cutout paper composition of human and money under dome
What to Do With Your First Paycheque

Receiving your first paycheque is sure to be exciting and definitely an achievement worth noting. However, it is crucial to understand what to do with the money if you want to build long-term wealth. Some good starters to follow are:

  1. Pay Yourself First (set aside 10%-20% of your income for asset-buying)
  2. Pay Your Must-Need Bills
  3. Hustle (if you can't afford your must need bills)
  4. Build Your Emergency Fund (3-6 months of expenses)
  5. Do Whatever You Want!

Follow these steps and you'll be well on your way to financial freedom!

What are your thoughts on investing / paying yourself first? Do you agree with these steps? Did I miss anything? Let me know in the comments!


Thanks for reading through What to Do With Your First Paycheque and thank you for following along. If you're still working on your first paycheque and want to learn about how to build income opportunities as a student, head over to this post here. If you want to learn more about me, head over to this link here. Finally, if you want to get exclusive updates and tips, drop your email in the “get updates” box (might have to scroll up a bit.) Let me know your thoughts and suggestions in the comments!

Jeff is a current Harvard student and author of the blog Financial Pupil who is passionate about learning, living, and sharing all things personal finance-related. He has experience working in the financial industry and enjoys the pursuit of financial freedom. Outside of blogging, he loves to cook, read, and golf in his spare time.