Congrats, grad: You’ve completed college and now you’ve landed a job!
Transitioning from school to full-time work is a big life adjustment. It’s also an important time to start laying the groundwork for your financial future.
Before you cash your first paycheck, here are a few helpful reminders when it comes to managing your money.
1. Understand what will be deducted from your pay.
If you have some work experience, you likely already know that taxes, social security contributions and other deductions will be taken out of each of your paychecks.
Plus, now that you’re working full time, you may wish to contribute to other work benefits that come out of your paycheck, like health insurance. Remember to plan your budget according to your net pay—the amount you take home after taxes and deductions—rather than your gross pay.
2. Create a budget.
It’s crucial to understand your fixed and flexible expenses so that you can create a budget that works for you. A budget ultimately helps you plan realistically and meet your financial goals, whether you’re saving for a vacation or paying down debt.
Start by making a list of all your nonnegotiable monthly commitments like car payment, auto insurance, rent, utilities and student loan payments. Don’t forget to factor in groceries, gas, bus passes or other expenses that may vary each month. From there, you can determine how much money you’ll have left for savings and discretionary spending at the end of each month.
3. Open a rainy-day savings account.
You never know when you’ll need to tap into your emergency fund to offset an unexpected expense. Start saving now by setting aside a portion of each paycheck in a separate savings account, and don’t touch that account except in emergencies.
You can set aside a percentage of each paycheck—perhaps 5 or 10 percent—or choose a dollar amount. Whether you put away $50 per paycheck or $500, the savings can quickly begin to stack up, leaving you with a cushy nest-egg when you need it.
4. Don’t wait to save for retirement.
Retirement may seem like a distant dream, but the earlier you start saving, the more you’ll have accrued when that day arrives.
If your employer offers 401(k) matching, take advantage: Aim to contribute the maximum that your employers match so you can make your savings go further. Even if your employer doesn’t pitch in, now is the time to start putting aside money for the future. Thanks to the interest you earn over time, a little bit of retirement savings today will amount to a serious chunk of change over the next several decades.