Your first professional contract: five things to sort before you spend

Signing a first professional contract is a huge moment, and it is natural to want to enjoy it. A few sensible steps at the start make every later decision easier.

1. Understand what you will actually receive

The headline figure in a contract is not what lands in your account. Tax, National Insurance and agent fees all come off. Check your payslips and know your real monthly income before making commitments based on the number in the press.

2. Put money aside for tax

Salary through PAYE usually has tax taken off before you are paid, but income such as sponsorship, appearance fees or image rights may not. If any of your income arrives without tax deducted, set a portion aside the day it arrives and speak to an accountant about what you will owe.

3. Build a cash buffer

Before investing anything, hold enough in an easy-access savings account to cover several months of essential costs. It means an injury, a transfer or a gap between contracts doesn't force you to sell investments or borrow at a bad moment.

4. Be careful with big fixed costs

Cars, rent and mortgages are commitments that are easy to take on and hard to get out of. A good rule is to base fixed costs on what you could afford if your next contract were smaller than this one.

5. Choose your advisers carefully

You will be approached by people offering investments and opportunities. Anyone giving you regulated financial advice in the UK should be authorised by the Financial Conduct Authority, and you can check this yourself on the FCA's Financial Services Register. If you are promised high returns with little risk, walk away.

This article is general information only and is not financial, tax or legal advice. It does not take account of your personal circumstances. Speak to a suitably qualified and authorised professional before making financial decisions.

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