FIRSTS Friday: First Job

If you’ve just landed your first job in your chosen career path, you might be wondering: what am I supposed to do with my new paychecks? How do I set myself up for future financial prosperity?

Here are a few tips to help you get started on the right track!

• If you don’t have a bank account, open one! Many banks offer simple, free checking accounts that can help you get started. Then, by setting up direct deposit with your employer, you can automatically get your paycheck deposited into your new account each month.
  
  
• Start saving right away. When it comes to securing a strong financial future, the time to start saving was yesterday! It will take several paychecks, but eventually you’ll want an emergency fund that’s enough to cover AT LEAST 3 months’ expenses. Ideally, closer to 6. This way you’ll have money to fall back on should you lose your job or experience an unexpected expense.
  
  Evaluate your monthly income and expenses, then decide how much you can afford to save each month. Make it easy by setting up automatic monthly transfers into your savings account!
  
  
• Take advantage of your employer-sponsored 401(k). If your employer offers matching 401(k) contributions, it’s good practice to at least invest enough into your retirement account to take full advantage of the match. As you become more financially secure, you can increase your contributions.
  
  
• Make a plan for paying off debt. If you’re starting your career with student loans or other debt, make sure you have a plan for paying it off as soon as you can. Here are a couple of debt repayment strategies for you to consider:
  
  
  1. The Snowball Method. In this method, you pay the minimum payment on all your loans except for the smallest, which you pay off as aggressively as you can. By “snowballing” your money to the smallest debt, you can eliminate them quicker and move on to the next smallest.
     
     
  2. The Avalanche Method. The debt avalanche helps you save money on interest by making minimum payments on all your debts and using whatever extra you have left to pay down your highest-interest debt first. From there you’ll move on to the next-highest, and so on.  
     
     Watch out for lifestyle inflation. Just because you have more money coming in doesn’t mean that you can start spending recklessly! Treats or rewards here and there are fine – but spending too much on unwise or frivolous purchases can harm your finances in a way that can be difficult to come back from.