Make the Most of Your First Paycheck

Set Your Finances Up For Success

Getting that first job after college or high school is very exciting, yet stressful.  You have many new challenges, opportunities, and commitments. And you likely have a lot of questions. One of the biggest new challenges may be the management of money and personal finance.

With your first paid job, and an actual paycheck, you might find you have new responsibilities and financial considerations.

It might feel like your paycheck disappears as soon as it shows up in your bank account, making this is a great time to learn how to manage your money wisely both for now and for your future.

Review your pay stub for the following:

  1. Wages for the period that accurately reflect your annual compensation
  2. Your federal income tax withholding allowances
  3. Check the number of allowances to claim on your W-4 using the IRS withholding calculator. Ideally, you should have just enough money withheld from your pay to cover your taxes so you neither owe nor get a refund
  4. Review any additional deductions you’ve chosen to have taken out, such as contributions to a 401(k) plan or health plan, for example

Create a Budget

Once you have an idea of how much your paychecks will be after income and payroll taxes, determine your expenses. Take note of how much rent you pay each month, whether you plan to move to a nicer place soon, and possibly saving funds to buy a car. Also, note how long before you have to begin paying back the student loans, and figure out how much you can pay on your loans each month. These items will play an important role in determining where your money has to go.

It is important that you establish this spending plan as soon as possible so that you don’t find yourself in financial trouble later.

Using a budgeting app is one way to make the process easier. Budgeting apps can directly link to your checking account or credit card accounts and automatically download transaction information. Then, through the app, you can track your spending, categorize budget expenses, set savings goals, and see at a glance how much money you have available.

My Spending

You can take charge of your spending, set limits, plan a budget, achieve your savings goals and get customized feedback with quick answers to important questions about your finances, like the following:

  1. How much can I spend today without impacting my scheduled bill payments?
  2. How much have I spent on groceries, restaurants and entertainment this week?
  3. Where did this recent charge occur?

The balance between managing debt and building up your savings.

Here are quick tips:

  1. If you have credit cards, it’s time to break that minimum payment habit as soon as possible and cut down the amount of money you’ve been paying on interest.
  2. If you have student loans, you generally have three to six months after graduation before payments must begin. Use this grace period to plan for the payments before they start. Find out how much the minimum payment will be and factor it into your budget now.
  3. Automate Your Savings Plan. If you have a set amount of money being set aside from each paycheck automatically, it is impossible to forget. Being prepared for unanticipated events and expenses is part of being a responsible adult.
  4. Begin Saving for Retirement.  While it may be true that you have 40 or more years until retirement, don’t wait to begin saving. Even a very small amount can begin to add up thanks to the effect of compounding interest.
  5. Check with your employer to see if they offer a retirement plan such as a 401k plan. Many companies even offer a matching program where you can essentially get free money just by saving yourself.
  6. Reward Yourself. While budgeting your money is wise, resentment can start to build if you put all of your money toward bills and savings without allowing any free spending for yourself.
  7. Add a category in your budget for a “slush fund,” which is the amount you want to set aside each month for discretionary spending on fun activities—things like vacation, hobbies, or the premium for a new car payment.

American Bankers Association

Trusts are not as mysterious as most people seem to think, and technological advances have made trust-based financial planning accessible to more and more families. That’s one reason why discussions of trusts seem to be popping up in the popular press more and more.

Life is full of “first” experiences to be cherished, and “first” experiences we may wish we had avoided. New “first” experiences continue to arise as we age, from wonderful experiences such as the birth of a grandchild to dreaded experiences such as aching joints and adjusting to new physical limits. But we don’t have to touch the stove to learn that it’s hot, we can learn that from others’ experiences too.
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