Handling the First Flush

When I graduated from college, I was lucky enough to have a job that I more or less walked straight into. I had about two weeks off between graduation day and the start of my new job.

That new job paid far more per hour than any job I’d ever had – and it was full-time, too. Up until that point, all of my jobs had been part time jobs.

The result? I was suddenly bringing in many times more per paycheck than I ever had in my life up to that point. I was flush with cash for the first time.

Unsurprisingly, I spent it. I bought lots of unnecessary things. I put down a solid down payment on a big pickup truck. I bought a bigger television and a new video game system. I took my wife on a trip to London where we stayed in a hotel within walking distance of Westminster Abbey. I eventually wound up establishing a spending precedent that got me in a lot of financial trouble.

Simply put, I didn’t handle my first time of being flush with cash very well.

What should I have done?

First, I should have respected that desire to spend. It’s something that happens for almost everyone. They get some cash. They celebrate because of it. They buy a bunch of things. Often, they end up regretting it a bit. If you ask anyone about their first job where they made real money, most of them will tell you some version of this story. The more you know, the more you can be ready for it.

Second, I should have put a plan in place, right off the bat. I don’t think there’s anything implicitly wrong about spending that money. However, if you plan for it a little bit, it doesn’t have to turn into a situation where you endanger your financial future just to have a little fun.

I recommend putting a simple automated budget in place when you get your first paycheck. Here’s what I would do.

1. Choose a bank that has robust online banking services. These services should include the ability to set up automatic transfers to other linked bank accounts. I use ING Direct, which offers these services.

2. Set up a series of transfers based on your goals. I would suggest a setup in which you have two checking accounts. One of them is the primary place where your paycheck goes, while the second one is the one where you can spend freely without any worries. Set up an automatic transfer of some portion of your paycheck from the first account to the second. You should also set up automatic transfers from that first account into savings accounts for your various savings goals, like saving for a car, saving for a house down payment, and so forth, depending on your plans.

3. Spend from the “free spending” account to your heart’s content. Buy whatever makes you happy – for a while. Eventually, there’s a good chance you’ll reach a point where your values will shift a bit and you’ll start to desire long-term security and the elimination of debt. At that point, just reduce the amount you transfer into that “free spending” account and increase the amount you’re transferring to other goals.

There’s nothing inherently wrong with wanting to spend more when you get your first good job. There is something wrong, though, if you spend most of – or all of – your newfound income. Get yourself in control of the ship right off the bat and you can have a lot of fun without putting yourself on a dangerous path.

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