What to Do With Your First Big Payout: Spend, Save, or Reinvest?
What an exciting moment; you just landed your first real payout from your business! Now comes the big question: do you spend it, save it, or put it back into your business? Making smart financial decisions now can help you avoid stress later and set you up for more success down the line. In this article, we’ll take you through exactly what to do after getting paid.
Take Care of Fixed Expenses
The first thing you should focus on is covering your fixed expenses, which should take up about 30% of your paycheck. So, if you made $1000 after tax from a few product sales, set aside $300 for the basics. These costs include payments like your phone bill, public transportation or gas, business-related subscriptions, and any other essential costs that keep your business running.
It’s also recommended to check in on what you’re actually using. If you’re paying for tools or subscriptions you haven’t touched in a while, it might be time for a mini audit. Go through your fixed expenses and see where you can cut back. Keeping your overhead low gives you more room to save, invest, and grow your business.
Prioritize Saving
About 33% of Americans say they’re struggling with money—which is why, as a young entrepreneur, it’s a good idea to start being financially aware early on. A good rule of thumb is to save at least 20% of your payout. If you can save more, even better. This strategy is how you start building your emergency fund (money that covers 3–6 months of expenses). Once that’s in place, you can start saving for things like college or professional courses.
Reinvest in Your Business
Putting some of your earnings back into your business is one of the best ways to help it grow. There are a bunch of ways to do this depending on what kind of business you run. Here are a few options:
- Inventory: If you sell physical products like T-shirts or handmade items, putting money into inventory can help you scale and meet more demand.
- Marketing: Use a portion of your earnings for social media ads or promos to get more eyes on your business and attract new customers.
- Outsourcing: Whether it’s help with editing, order fulfillment, or customer service, hiring someone can take tasks off your plate.
- Skill-building: If there’s a course or coach you’re interested in, now’s a good time to invest. Improving your business skills can lead to more profit.
How much you put back into your business depends on what feels right for you. A starting point is to reinvest around 40% of what you earn. So, out of the $1000 paycheck mentioned above, you would reinvest $400 into your business.
Reward Yourself Responsibly
With the final 10% of your paycheck, you’ve got some flexibility. You can choose to put that extra bit into savings or reinvest more into your business if that feels right. But one thing worth prioritizing is learning how to reward yourself responsibly. It’s okay to enjoy your success. Celebrating your progress can keep you feeling excited about future goals.
Here are a few ways you can use that last 10% to treat yourself:
- Buy a new book you’ve been wanting
- Get a journal to track your goals or reflect
- Take yourself out for a good meal
- Go to the movies or enjoy a fun activity
- Do anything that brings you joy, even if it’s not business-related
Success isn’t only about the hustle. Life is also about hobbies, time with people you care about, and taking care of yourself outside of your business.
The Big Picture
Breaking down your first paycheck like this might feel a little tedious at first, but as your paychecks get bigger, you’ll be glad you started early. Putting financial strategies in place now sets you up for a better future. Try making it a fun routine—something you do after each payout—to keep yourself on track and build the kind of success you’re aiming for as a young entrepreneur.
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