The first paycheck of the year is momentous because of its symbolism. How should you spend it? Pay back debt? Invest for the future? Every option feels weighty.
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According to Adam Garcia, certified financial planner and founder of The Stock Dork, the question of what to do with that first paycheck is one they get often from clients.
“I remember a particular young professional client around their mid-20s. The first question we had after they received their first salary was about the salary allocation towards the future,” he said. “It was a big moment for them; they didn’t know how to spend their income. As a team, we decided to save first, manage debts and invest thereafter.”
There are many ways to go about it — below are some that may work for you.
Start the Year With Purpose
When you receive your first paycheck of the year, it’s an opportunity to set the tone for your finances in the months ahead, said Shirley Mueller, finance expert and founder of VA Loans Texas. “In my experience, the first thing you should do is revisit your financial goals.”
Whether it’s building an emergency fund, paying off debt or contributing to retirement, she said to earmark a portion of that paycheck for these priorities. “For example, if you didn’t max out your retirement contributions last year, now’s the time to adjust your allocations and make sure you’re taking full advantage of employer matches or tax-advantaged accounts, like a 401(k) or IRA.”
She noted that starting early builds momentum and allows compound interest to do its magic.
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Evaluate and Adjust Your Budget
According to Mueller, your first paycheck is also a great time to audit your budget and make necessary adjustments.
“Life changes — maybe your rent increased, you’re planning a vacation, or you’ve decided to focus on saving for a big purchase,” she said. “I recommend allocating at least 20% of your paycheck to savings and investments, following the 50/30/20 rule.”
Pay attention to your discretionary spending categories, as well.
“Many of my clients have found it helpful to take the ‘no-spend January’ challenge to reset their habits and channel extra funds into savings or debt reduction,” she added.
She said this intentional approach ensures you’re aligning your spending with your goals rather than letting old patterns dictate your year.
Don’t Forget a Reward
Finally, while it’s important to focus on responsibility, Mueller always advises setting aside a small amount for yourself, whether it’s treating yourself to something small or putting a little extra toward something you’re looking forward to later in the year.
“Financial discipline doesn’t mean you have to forgo joy, and celebrating small wins along the way keeps you motivated,” she explained. Just make sure that “reward” doesn’t derail the bigger picture.
Finally, Mueller said, “The first paycheck of the year is symbolic — it’s a chance to reaffirm that you’re in control of your finances and laying a strong foundation for everything else to come.“
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This article originally appeared on GOBankingRates.com: Here’s What You Should Do With Your First Paycheck of 2025, According to Experts
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