There are few finer experiences than receiving your first job offer. School will eventually pay off. Your career is beginning. But what happens next? You have landed your first job. What happens now? Find out below. Meanwhile, use our free 7-Step Credit Card Debt Slasher to pay off any credit card debt faster.
Let us celebrate and focus.
You did it. You graduated, searched high and low, and got your first job. It is time to rejoice! Go out big with your buddies this weekend, or maybe purchase that automobile you’ve been eyeing for a long time.
Hold on, however. Not so fast. Yes, you’ve got your first “real” job. However, it’s unlikely that you’ll earn as much as an NFL All-Star.
Let us put your knowledge to the test and establish a solid financial foundation for the rest of your life. You won’t have another chance to start, so do it well the first time. Financial blunders committed early in life can have long-term implications. So, let’s get this correct.
Here are five strategies for laying a solid financial foundation. There is more you can do to manage your money later, but start small and expand as you learn and your income rises.
1. Avoid spending more than you make.
You will most certainly earn more money than you have in the past, but you will also incur costs. You will be required to pay income, FICA, and Social Security taxes even before receiving your payment. Then there are your discretionary costs, such as phone, auto insurance, and rent, among others. Deduct these costs from your paycheck before you spend any money on anything else. Here’s how.
Calculate your take-home pay (the amount you’ll get after all deductions).
Take note of when your payday(s) come each month.
Total the amount owing for each bill every month.
Remember when each bill is due each month.
Determine which paycheck(s) will pay which debts.
Calculate how much money will remain from your paycheck(s) once all bills are paid.
If you won’t have any money left over after receiving a specific paycheck, contact your lenders or service providers and reschedule the due dates to better match your paydays or minimize your costs. If you have more money, you will have additional possibilities for getting started.
2. Start saving.
Enroll in your employer’s retirement plan as soon as feasible. If you still have money after the previous step, you can donate it to a retirement account. A 401(k) is most likely the type of retirement plan offered by your company. There are others, but this is the most popular. Contributions to 401(k)s are made using pre-tax monies and taken automatically from your paycheck. This decreases your tax liability while also ensuring regular and frequent donations.
Both of these are crucial. Taxes are going to be one of your top costs. Reducing tax payments can save you a lot of money over the course of your lifetime. Regular and regular investing is critical for building your financial portfolio.
If feasible, start contributing 10% of your income to your employer’s retirement plan. Increase this by 1% every year, plus half of any raises you receive. This allows you to make the most significant contribution to this account in the shortest amount of time. The current maximum yearly contribution is $20,500 as of 2022. If you are unable to start with 10% of your salary, strive to contribute the minimal percentage required to earn the full employer match. Most firms match employees’ contributions up to a specific proportion. Don’t pass up this opportunity to receive free money.
If your workplace does not provide a retirement plan, you can start a Roth IRA with an online brokerage firm that has no minimum balance costs. The maximum annual contribution to a Roth IRA is now $6,000 as of 2022. These accounts allow you to invest in stocks, mutual funds, ETFs, and other types of assets. The online brokerage business where you open your account might provide investing advice.
In any case, invest as much as possible. It is simpler to live without now than later.
3. Open an emergency savings account.
An emergency savings account is a cash account with enough funds to cover you in the event of an emergency. An emergency might involve a vehicle accident, a skiing accident, the loss of a job, or any other unforeseen expenditure. You should ultimately have enough funds in this account to cover three to six months’ worth of living expenditures. Start by depositing $20 every paycheck into this account. If you can afford it, do so.
This account, like your retirement plan, requires regular and frequent contributions. If your company offers direct deposit, you can have it automatically deposited into a different account from your other active accounts. This eliminates the need for you to remember to make this contribution and lowers the likelihood that you will choose not to make your monthly investment.
4. Do not rely on credit cards
Live below your means. If you’re living a lifestyle that you can’t afford while following the recommendations above, you should change your ways. Have a fantastic time, but stay within your means.
You don’t want to have a credit card hangover after a few years of overspending. Credit card balances may rapidly accumulate, especially if you simply add small amounts here and there.
There is a time and place for using credit cards. You may wish to use them to improve your credit score and history. If not handled appropriately, they can potentially damage your credit score and history.
If you have a credit card, pay off the debt every month. Reducing or eliminating credit card interest payments, like taxes, saves significant money over time.
5. Keep learning.
As you begin to earn and save money, you will quickly realize how much fun it is. There is a lot to learn, particularly if you intend to invest in stocks or cryptocurrency. Read literature about savings and investment. Read investment-related blogs and websites. Listen to financial podcasts. Speak with friends and family members who are successful investors. You can take classes at community colleges or online.
Be financially careful and aware of global events. We are aware with how the stock market is performing. Understand where the unemployment rate is and how our GDP is performing.
Being financially savvy will benefit not just your savings and investments, but also your career. It will tell you when it is OK to take certain professional risks, when your organization should make a strategic move, and when you should request a raise. It will enable you to communicate more effectively with the executives of your firm.
This may seem like a lot. Do whatever you can when you can.
If you are unable to make maximum contributions to your 401(k) while also starting an emergency savings account, begin by making a lower contribution to your 401(k). If you can start practicing any of these activities, you’ll be laying the groundwork for a solid financial future.
This achievement is more than just enjoying a nice retirement. It is the capacity to make a job change in several years if desired. It might be obtaining FI/RE – Financial Independence/Retire Early. There are unlimited options, but you must first establish a solid financial basis.
