Before you spend your first paycheque on luxuries, make sure you draw up a budget.

Once you graduate and start working, it may feel like you have won the lotto. You go from struggling student to having your first paycheque.

This novel feeling of wealth is often short lived once you realise how high the true cost of living is. Then along comes the temptation to take up one of the many offerings of credit that come your way once you are employed, from store cards and credit cards to personal loans.

Between all of these credit offerings, you could access around three times your monthly salary in credit. That can lead you to wonder, “Why should I wait when I can have it all now?”

Unfortunately, it doesn’t take long before you realise what the true cost of credit is, and suddenly you find that your whole monthly paycheque is being used to repay loans that you took for things you may not even remember buying.

Before you know it, you have fallen into a cycle of debt that could take you years to break.

The most important step to take before you receive your first paycheque is to put a budget in place. Your budget needs to be categorised into necessary or fixed expenses, luxury expenses, savings (long-term and short-term), and emergencies.

A good rule of thumb is to divide your budget based on a 60/20/20 rule: 60% of your income goes towards necessities, 20% towards financial goals and 20% towards luxuries.

You can use the budget template tool (the household budget calculator) on the Money Makeover website to help you set up your budget.

One of the financial advisers in this year’s Absa/City Press Money Makeover Challenge, Anton Battiss, has some advice for youngsters who have just received their first paycheque and want to set up a budget. Read more here.