What to do with your first paycheck: a simple plan for your first month of work

What to do with your first paycheck? First, check what you take home

The salary you signed for is rarely what lands in your account. Your pay stub shows gross pay, the total before deductions, and net pay, what you actually receive. The CFPB, the US consumer finance agency, defines net income as the money you receive in your paycheck after taxes and other deductions are taken out. Plan your month with your net pay, not the number in the offer.

Also check how often you're paid: monthly, twice a month or weekly. That's the rhythm of your budget: what you get in one paycheck has to last until the next. If you started work partway through a pay period, your first check may be smaller than the rest.

Sources for this part:Consumer Financial Protection Bureau (Estados Unidos)

What deductions show up on your first pay stub?

Deductions depend on your country and your type of contract, but there are almost always two groups: income tax your employer withholds in advance, and social security contributions, such as health and pension. Here are the basic ideas, without rates, because they depend on your pay and each year's rules.

In the United States, the stub shows federal income tax withheld and Social Security and Medicare taxes, known together as FICA; depending on your state, there may also be state income tax. In the United Kingdom, the government requires your payslip to show your pay before and after deductions, and the deductions that can change each time you're paid, such as tax and National Insurance; pension contributions or student loan repayments may also appear.

In Spain, the Finanzas para todos website explains that the worker's social security contributions and income tax withholding, or IRPF, an advance payment of income tax, are taken off your gross salary. In Mexico, the tax authority, SAT, says your employer must give you an electronic payroll invoice for every payment and handles the monthly tax withholding, and the Social Security Law requires the employer to withhold the IMSS contributions you owe.

In Colombia, the Ministry of Justice notes that the law sets deductions for health and pension, and that your employer can only deduct what the law says, what a court orders or what you authorize in writing. In Brazil, the law requires the company to deduct your INSS contribution from your pay, and income tax withheld at source shows on your pay slips; the FGTS is different: it's a monthly deposit your employer must make, equal to 8% of your pay, or 2% on an apprenticeship contract.

If something doesn't add up, ask whoever pays you first. In Brazil, the Federal Revenue suggests comparing the tax withheld on your annual income statement with your monthly pay slips; in Colombia, if you're charged deductions that aren't allowed, you can go to a labour inspector.

Sources for this part:Consumer Financial Protection Bureau (Estados Unidos), GOV.UK (Reino Unido), HM Revenue & Customs, GOV.UK (Reino Unido), Finanzas para todos, Plan de Educación Financiera (España), Servicio de Administración Tributaria, SAT (México), CONDUSEF, copia del texto vigente de la Cámara de Diputados (México), Ministerio de Justicia y del Derecho (Colombia), Presidência da República, Planalto (Brasil), Receita Federal (Brasil), Presidência da República, Planalto (Brasil)

Pay yourself first: savings come before spending

A classic piece of advice for a first paycheck comes from The Richest Man in Babylon, by George S. Clason: part of everything you earn is yours to keep, and it's set aside before you spend. Clason suggests at least one coin in ten, that is, 10%.

The CFPB says the same thing in other words: if you get a regular paycheck, pay yourself first by putting a portion of it automatically into savings. If 10% doesn't fit yet, start smaller: what builds the habit is setting something aside every time you're paid, even if it's a little.

Sources for this part:The Richest Man in Babylon, Consumer Financial Protection Bureau (Estados Unidos)

Your first emergency fund

An emergency fund is money set aside only for expenses you didn't plan: a repair, a medical bill, a month without income. The CFPB describes it as a cash reserve set aside for unplanned expenses or financial emergencies, and says setting one up is one of the first steps you can take to start saving.

How much? According to the CFPB, it depends on your situation: think about the unexpected expenses you've had most often and what they cost. To start, set a small, reachable goal. An example with round numbers: if you set aside 100 from each monthly paycheck, in six months you'll have 600. Keep it apart from your everyday money, somewhere safe that you can reach quickly.

Sources for this part:Consumer Financial Protection Bureau (Estados Unidos)

A simple budget for your first month

You don't need a spreadsheet. As soon as you're paid, take three steps in order: put away what's due before your next payday, like rent, transport or your phone plan; then your savings; and what's left is for your month.

An example with round numbers: 1,000 lands in your account. What's due before your next payday adds up to 450, and your savings are 100. You have 450 left for 30 days, or 15 a day. Track your spending during that first month: by the end, you'll have your first real picture of what your life costs.

Sources for this part:The Richest Man in Babylon

Avoid new debt while you're starting out

Your first job brings credit card and instalment offers. A credit card isn't extra salary: it's borrowed money. In the United States, the CFPB explains that if you don't pay your balance in full by the due date, you lose the grace period and are charged interest on the unpaid balance and on new purchases.

Instalment purchases weigh on you too: Condusef, Mexico's financial consumer protection agency, reminds you that they commit your future income and that if you fall behind, you end up paying interest. In your first months, only put on a card what you could pay for today with your own money, and keep instalments for things that last.

Sources for this part:Consumer Financial Protection Bureau (Estados Unidos), CONDUSEF (México)

And how should you invest your first paycheck?

First, the cushion. Investing is for money you won't need soon, and without an emergency fund any surprise can force you to cash out your investment or borrow. That's why the CFPB puts the emergency fund among the first steps to start saving.

Once you have it, learn before you put your money in: understand what you're investing in, what could go wrong and when you could take it out, and check that the firm is authorized by your country's financial regulator. Be wary of anyone who promises high, guaranteed returns.

Sources for this part:Consumer Financial Protection Bureau (Estados Unidos)

How to do it in Oslo

When you start, Oslo asks “When does your money come in?”: you choose how often you're paid (monthly, twice a month or weekly) and the days your pay usually arrives; if it's always the same, tick “Always the same day”. You can change it any time in More, Your money, “Pay cycle”.

With that, and your pay logged as income, Today shows “You have”: what's left until your next payday, already without what's due before then and without what you've put into your goals. Tap “Why do I have this available?” to see the math line by line. And on days you don't spend anything, tap “I didn’t spend today” and your streak keeps going.

To pay yourself first, go to Money, Goals, tap “New goal” and answer “What are you saving for?”, “How much do you need?” and “By when?”. Every time you set money aside, tap “Log savings”: Oslo only records it, and you move the money in your bank or app. Oslo also comes with an “Emergency fund” account, which never takes a slot of your plan and whose money doesn't count as available to spend. On the free plan you can have up to three goals.