I Lost My $140K First Job — How To Avoid Blowing Your Paycheck

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When you land your first high-paying job, it can feel like you’ve hit the jackpot since you can finally afford to do the things you’ve been dreaming about. After making minimum wage and constantly feeling like you can’t afford anything, it’s exciting to finally be proud of your income. However, it’s entirely possible that you could make numerous financial mistakes after landing your first high-paying gig.

GOBankingrates spoke to the leader of Eh Marketing Company, Steven Maxted, who made $140,000 in his first year as an account executive in the agricultural tech industry. Here are the mistakes Maxted said he regrets making in his first high-paying job. 

Lifestyle Inflation: Spending More Money

Typically, when your income goes up, your spending does too.

“I made lots of money, so my spending naturally increased,” Maxted said. He was making more money than ever before, so he finally had the means to spend on a higher level.

Everyone works hard for their paycheck, so it makes sense that you’ll also want to reward that hard work by upgrading your lifestyle. Unfortunately, it’s all too easy to get carried away.

While there’s nothing wrong with spending some money when you get a higher-paying job, you want to ensure that you’re still saving for the future. If you’re in a sales position or making decent commission-based money, you can’t expect your income to remain high forever.

Financial Tip: Set a Budget

Instead of taking the time to create a solid financial plan to maintain his wealth, Maxted instantly started spending more money. While making six-figures can be very exciting, ideally you should try and save some of it.

Tracking your income and spending will give you a better idea of where your money is going. You can do this by creating a budget that lists your income, expenses (fixed and variable) and financial goals. Then, using your budget, establish a clear plan to achieve those goals (e.g., saving up for a home, planning a wedding and so on).

Lifestyle Creep: Losing Track of Expenses

When you lose track of your expenses, you stop being able to make mindful decisions about your money, like where to cut back or how to invest.

Maxted’s lifestyle inflation became excessive. He was spending too much on luxuries and services and not reviewing his expenses. So, he decided that for every luxury he purchased, he would invest the same amount in assets — putting that money somewhere it can grow.

As your income increases, it’s normal to want to equally increase your standard of living, but you should try to stay moderate. You want to ensure that your expenses don’t get so excessive once you get a taste of a high income that you would struggle to maintain it if your income suddenly decreased.

Financial Tip: Track Your Expenses

You want to be cautious of how often you treat yourself. While you should celebrate your progress, you don’t want to lose track of your financial goals.  

Here are some common issues to watch out for:

• Limit your variable spending on dining out and entertainment. You’ll want to go out more often and enjoy entertainment options you couldn’t afford before the high-paying gig. You just don’t want to let these costs destroy your savings. 
• Don’t sign up for too many luxury services. You’ll likely want to join a premium gym and upgrade certain services in your life, but don’t go overboard. You just want to add up these fixed expenses to verify that they’re not eating into your savings too much. 
• Focus on saving first. You want to pay yourself first and get into the habit of putting some funds aside for savings first. You don’t want to spend first and then save what’s left because you may overindulge. 

Thinking This Money Will Continue Rolling In 

Maxted noted that his contract was terminated in his second year, so he didn’t even get two years of experience before losing his job. While he earned a surprising amount of money in his first year, he was out of work 10 months into the second year. This meant that the big checks stopped rolling in before a new job search could begin.

It’s easy to think that the money will keep on rolling in, especially once you are accustomed to your lifestyle. However, the reality is that numerous external economic factors could impact your earnings. 

Financial Tip: Expect the Unexpected

Maxted lost his job and scrambled to replace his income. You can’t assume that your income will remain high, especially since the last few years have shown us that anything’s possible. 

Many financial experts suggest that you save up to three to six months’ worth of living expenses in an emergency savings fund. You want to build this fund because you never know what life will throw at you.

Think of this as your own in-house unemployment or health insurance; it will cover your costs in case of an emergency.

No Long-Term Goals or Retirement Planning

It’s easy to lose sight of retirement planning when you’re earning six figures. You might even feel like you don’t have to worry about it just yet.

Maxted was excited to shop and treat himself because he finally had the money to do so. But this also led to him neglecting his retirement savings in that first year and missing out on compound interest.

Financial Tip: Strategize and Invest for Your Future

As much as you may want to live in the moment, you must also plan for the future. In addition to your emergency fund, you should also set funds aside for retirement. You don’t want to miss out on compound interest because you spent too much money on your new lifestyle. 

The sooner you start contributing to your retirement accounts and putting away money for the future, the sooner you can start considering exiting the workforce. You don’t want to work longer when you’re older because you didn’t save enough from your high-earning years. 

Build the habit of investing and saving with every paycheck so that you don’t just blow all of your money on treating yourself. 

Final Take To GO

The bottom line is that while Maxted was excited to earn (and spend) his paycheck, there were other ways he could’ve used it to improve his finances. If you can avoid these early mistakes, there’s a chance you could even grow your wealth.

And remember, the good times won’t always last forever. Make sure you are financially padding your emergency fund should you stumble through paycheck shocks such as job loss and unemployment. 

Caitlyn Moorhead contributed to the reporting for this article.

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