What to do with your first income

Your first pay feels like freedom, and it is. A simple plan for each payment lets you enjoy some of it, save some of it and give some of it, without your spending quietly rising to swallow everything you earn.

Start with a budget

• MoneyHelper suggests tracking your spending, for example with a spending diary for a month, to see where your money goes.
• Use your net pay (what actually arrives) as the starting number, not your gross pay.
• Split spending into fixed costs (phone bill, transport pass) and variable costs (food out, clothes, gaming). Variable costs are the ones you control.
• Use a free budget planner, a spreadsheet, a notebook or a budgeting app, and review it every month.

Pay yourself first

• The US Consumer Financial Protection Bureau recommends deciding how much to save each pay period and moving it to savings before spending on anything else.
• Make it automatic. A standing transfer on payday means you do not have to rely on willpower.
• Small amounts add up: AED 50 a week saved for 52 weeks is AED 2,600 a year.
• Build an emergency cushion first. The FDIC suggests adults aim for two to six months of essential expenses; for you, a smaller starter target, such as one month of your own regular costs, is a sensible first step.
• Give each saving pot a goal: a laptop for university, a driving course, a trip, or a deposit for your first rental.

A simple split

• The 50/30/20 rule, popularised by Elizabeth Warren and Amelia Warren Tyagi, splits take-home pay into 50 per cent needs, 30 per cent wants and 20 per cent savings.
• If you live at home and have few needs, you can save a bigger share. For example, on AED 1,000 a month: AED 500 savings, AED 400 wants, AED 100 giving.
• Whatever split you choose, write it down and stick to it for three months before changing it.
• Check the maths: your percentages must add up to 100.

Giving

• Setting aside a share for charity or to help others builds a lifelong habit, whatever your faith or values.
• Give through registered charities or official channels, and be cautious of unknown appeals on social media.
• Giving can also be time and skills, such as volunteering or free tutoring for a younger sibling's classmates.

Avoiding lifestyle creep

• Lifestyle creep is when your spending on luxuries rises as your income rises, so you never feel better off.
• One guide suggests saving at least half of every pay rise, so you enjoy some and keep some.
• Before a big purchase, ask two questions: am I still hitting my savings target, and will this improve my life enough to justify the cost?
• Watch subscriptions and small daily spends. A AED 15 coffee five days a week is AED 75 a week, or AED 3,900 a year.