A massive milestone in your young life is when you land your first job. That first paycheck is memorable, and what you spend it on can be as well. When you first get paid, it will be a celebration. But you do not want every paycheck to be a party.
You want to be smart with the money you make. Especially as a college student, you are used to being broke. Once you get that first taste of disposable income, it is essential to understand your options. One option is to spend it all on hedonistic things. That shouldn’t be the option you choose. Of course, we all need to let loose, but you don’t want to live paycheck-to-paycheck because of it.
This guide will give you better options that will set you up for success. Once you get your first job, follow these tips to manage your finances.
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Toggle1. Figure out your student loan situation
Odds are if you went to school and your parents didn’t bankroll you, you have student loans. If you have a loan and you graduate, lenders will be looking for you to start the repayment process.
Typically, there are “grace periods” with a loan. Lenders will give you six months after you graduate to sort your life out before you enter repayment status. It is important to remember that although you are in this period, interest will continue to accumulate. This is why it is vital to start paying your loan back right away; you will save money on interest.
2. Understand your cash flow
Figure out how much you are making every paycheck. Make sure you account for deductions like income tax, insurance, and retirement contributions. Also, determine if you will be getting the same paycheck every time. Are you working a salary position, or do you work hourly? If you work hourly, will you have a different number of hours every paycheck? If you do, it is essential to note that you won’t have the same amount of money being deposited into your bank account.
Once you understand your cash flow coming in, you need to look at your cash flow going out. What do you spend your money on? First, look at the necessities. Food, rent, car, are among other things you need to in your daily life to survive. Once you determine your cost per month on necessities, take a look at all of the extras you spend your money on. See how much you pay for entertainment, eating dinner out, date nights, etc.
Once you analyze these things, you will understand your cash flow.
3. It’s time to budget
A budget is planning your cash flow. You already know what you make and what you spend. A budget is taking those things into account and then creating limits. The ultimate goal of a budget is to save money and not go in debt.
Start with a certain number. This could be a number that you want as a floor in your bank account after every paycheck. If your paycheck is 500 dollars biweekly, you may aim to be left with $50 before your next paycheck. This will end up with you saving $100 a month, and $1200 for the year.
Jules Barrett, a business writer for Brit Student and Write My X, offers some advice. “Having a budget will make you more disciplined with spending. It will keep you honest with what you are spending your money on. If you are spending a quarter of your paycheck on unnecessary things like candy, it may be time to cut that.”
4. Let’s think about retirement.
You just got your first job, and you already have to think about retirement? It seems like retirement is so far away, but you always hear the same thing from seniors that life goes by fast.
An interesting fact is that young people in the labor force are set up to save the most money effectively. Think back to your accounting course. Retirement accounts are invested and accrue compound interest. This means that you will get interest on your interest. If your employer offers a pension plan and matches your contributions, you will be set up for success.
There are other ways to save for retirement. Investing in mutual funds, stock market, etc. are a way to go if you know about finance or want to hire someone to do that for you.
Whatever way you want to do it, you want to make sure that a little bit of money is taken out of your account each paycheck to go towards your retirement. Retirement seems like a long time away, but it isn’t.
What are your financial goals for the upcoming years?
It is pretty standard what your paycheck covers right now as a youth. It’s going towards rent, food, maybe a car, and entertainment. However, what do you think your money will be going towards in the next couple of years?
It is crucial to think about your life trajectory. You won’t have all the answers right now, but it is essential to understand that things will change. There are milestones in life that most people strive for. Things, like buying a house, having a wedding, a child, and going on vacation, are things people save their money. If any of those things are something you want, you need to consider your finances. By preparing for them early, you will be able to obtain your goals easier.
5. Have money auto-transfer into your savings account
Mentioned a little earlier in the post, it is crucial to have money sent into your savings account every paycheck. It can be stressful sending money away that you know you can’t spend. That’s why a great tactic is to set up auto-transferring.
Suzannah Stabely, a finance blogger for Australia 2 Write and Next Course Work, says, “by having auto-transferring set up from your everyday account to your savings account, it takes your mind off saving. You won’t stress every paycheck when you manually send money away you won’t touch for years.”
It is important to consider the money that is automatically sent from your account into your savings, not part of your daily cash flow. You will not be sending that money on everyday things.
6. Buy proper insurance
We all look at insurance as wasted money until we need it. It is a pain to go into an insurance broker, but you will be happy you did if anything happens.
Purchase proper health insurance, and hopefully, it’s subsidized by your place of work. The most morbid insurance to buy is life insurance, but make sure you do. You want your loved ones set up to handle business if anything happens to you.
Financially you need to buy insurance because if you get hit with a hospital bill you didn’t have insurance for, it could take away all your savings and possibly more. Make the smart decision and buy insurance!
Follow these tips to manage your finances after you get your first job!
A business expert at PhD Kingdom and Academic Brits, Michael Dehoyos has started multiple businesses. He enjoys working as a marketing consultant and works with many different sites and publications. In his spare time, he enjoys writing for Thesis Help.
