You’ve nabbed your first
big job! Congrats! It’s a huge milestone that calls for celebration. You’re
finally earning “real” money – what a thrill!
Getting hired for your
first job after college is a big deal. But don’t be foolish now that you’re
making the big bucks. Setting yourself up for long-term success is essential. Here
are five things you should do to get into tip-top financial shape so you can
prosper and enjoy that hard-earned cash.
Make A Financial Plan
The first big step to
take once you’ve landed that first “real” job: make a plan for your life and
your finances.
I know, BORING. But we
all know people who float through life and don’t pay attention to their
finances. They don’t have money when they really want (or need) it. That
doesn’t have to be you!
Think about what you
want for yourself next year. What about five years from now? Don’t just coast
and go along with what your friends are doing. Take some time to plan and
dream.
Is a pile of student
loans crushing you? Is marriage, buying a house, or travel on the horizon?
Making a game plan for your life will help you focus on what matters most and clarifies
where you are now. Write down your financial essentials (rent, groceries,
student loans) and your future goals and prioritize what you want and need to
do. Create a monthly budget (which can include “fun” money) and then stick to
it. You’ll appreciate yourself much later when you’re sitting on the beach or
opening the door to your first house.
Build an Emergency Fund
You’ve likely heard that
about half of Americans don’t have enough money for a small emergency. How
stressful! We all have to be prepared for those little things that go wrong in
life. Do you want a fender bender to rack up credit card interest? A minor
medical bill to derail your budget for months?
Everyone needs an
emergency fund. Even when you’re just starting and may not be making big bucks,
it’s a necessary step. $1,000 is a great starter emergency fund, and you’ll
eventually want to build that up to include 3-6 months’ worth of expenses.
Using a high-yield savings account is perfect for this. It helps keep
your e-fund separate from your regular funds, plus the higher interest rate
helps make your money work for you. So, get a savings
account started immediately (like TODAY). It’s
super simple to set one up online in minutes!
Don’t think you’re
immune – emergencies will hit you, too! While you can’t always prevent them,
you can ease the financial burden by socking away cash for those events.
Start Saving for Retirement
What? I just started my first real job, and
you want me to think about retirement already?
Yup. You got that right. Starting your first job means it’s the perfect time to start planning for your future. In fact, socking money away in a work-sponsored retirement account is one of the best investments you can make!
Investing for retirement early in your career will set you up for success. Time is on your side, especially in your twenties! The magic of compound interest can turn your $10, $20, or $50 each month into serious money in thirty to forty years! If you save enough, you may even be able to retire early!
No matter how little the amount, when you give
money time to grow in a Roth IRA or other investment account, every dollar
multiplies. As your income goes up (and as you pay off debt), be sure to
increase your investment contributions. And, of course, if your employer offers
a 401(k) match, that’s a no-brainer benefit to snatch up! It’s free money!
Pay Off Student Loans Promptly
Another big step on the path to financial wellness
is to pay off your student loans ASAP! With average loan balances in the tens
of thousands, this aspect of your finances can’t be ignored.
The last thing you want to do is hang on to
those babies for the next twenty or thirty years, right? They’ll hold you back
from investing and serious fun. So, start paying a solid amount over the
minimum on those loans right off the bat. Even an extra $5/month can shave
thousands off your loans over time.
The sooner your loans are wiped out, the less
you’ll fork over in interest payments. As your income increases, you should
increase your monthly payment amount to knock out the debt faster.
Trust me, once your student loans are out of
the way, the freedom will be intoxicating. No student loans in your name? Think
what you could do with that money!
Act Your “Wage”
As an adult with a real job, you can use
common sense with your money and not spend beyond your means. Act your “wage”,
not just your age, by living a lifestyle that matches your income and financial
situation.
So, your friends are beaching it up in Cancun
next spring? That doesn’t mean you should be booking a ticket, too! Your
college roomie just got a hot new car? That doesn’t mean you should saddle
yourself with those hefty monthly payments.
Go back to that plan you made in the first
step, and you’ll see what fits into your budget and what doesn’t. Someday,
you’ll probably be earning more money than you are today, but you’ve got to
live realistically in the meantime.
Create a reasonable budget that allows you to
pay off debt and cover your basic needs. Then – here’s the key: follow the budget! Don’t be swayed into
luxuries you can’t afford. (Hint: don’t let credit cards fool you into thinking
you make more than you do!).
Some tips for keeping expenses low:
- Choose affordable housing or split
costs by having roommates - Drive an inexpensive used vehicle
with good gas mileage - Make an expensive night out a rare
treat that you’ll look forward to - Never say “but it’s only $20” (it
adds up!)
Final Thoughts
It may feel impossible to squeeze a single
dollar out of the budget after all the necessities. But trust me, you’ll thank
yourself later if you get into the habit of saving and investing now.
Starting your first job can be daunting but
putting a strong financial plan in place will be worth it!
Kate Underwood is a freelance writer and
staff writer for Club Thrifty,
a website dedicated to helping people dream big, spend less, and travel more.
Tell us your experiences with saving and investing after
your first job (and give us your tips!) in the comments below!
The post 5 Things You Should Do When You Get Your First Job appeared first on Faithful with a Few.
SOURCE: Faithful with a Few – Read entire story here.
