After months spent scouring career boards and hours of networking, interviewing, and submitting applications, landing your first job is a major relief, and a big accomplishment. Receiving your first salary is very exciting, but if you’re not sure how to manage it, your financials can become overwhelming. We have compiled tips on how to manage your first salary, strategies to help you save money, and explain how to adjust as your career flourishes.
Make And Live on A Budget
When you make a budget, you can make proactive choices about where your money goes. Learn How to Make Budgeting Simple and use our Home Budget Calculator to begin creating your budget.
Start Saving Right Away
You may feel intimidated by the commitment to save money at your first job, especially if you’re carrying student debt or feeling like you aren’t making quite enough. Saving money at your first job will put you in a better place for when you’re a seasoned professional. The earlier in your career you start to save, the more time you’ll have for your money to grow exponentially, thanks to compounded interest.
Determine How Much of Your Paycheck You Should Save
While your specific savings rate will depend on your goals and circumstances, its often recommended you save 20% of your monthly take-home pay. If it’s too challenging with your monthly expenses to save 20%, try starting with 10%. Review your essential expenses, like rent, student loan payments, utilities, and groceries. Save from whatever cash is “left over” each month and see how close you can get to that 10 to 20 percent goal.
Define Your Savings Goals
To help you get in the habit of saving money, define exactly what you’re saving for. By setting reasonable goals for yourself, you’ll feel more accomplished when you meet them. Make sure all savings goals have a timeline, a cash amount, and an end date. Smaller goals overtime can transform into larger ones as you begin meeting goals more often.
Build an Emergency Fund
It’s important to have some readily accessible funds set aside for unexpected expenses. If you’re young and single, you should try to strive to save six months of living expenses in your emergency fund as a guideline; but that can be different for every individual depending on where they live and family situations.
Use Automation
By automating your savings, you reduce your chances of overspending or skipping savings altogether. You could set up a weekly or a monthly automatic transfer from your checking account to your savings account. Or you could ask if your company’s payroll department allows you to split your direct deposit, sending some of each paycheck into your checking account and some into savings.
Keep Retirement in Mind
You want to start saving for retirement, even if that seems like ages away. Thanks again to compound interest, time is on your side. Enroll in your employer-sponsored 401(k) plan and take advantage of employer matches if they’re offered. Your 401(k) contributions automatically come out of your paycheck, so you won’t even have time to miss the funds.
Eliminate Debt
Add your existing debt into your hard budget. Organize each item by highest to lowest interest rate and include each minimum payment amount. Begin paying down those debts with higher interest rates first; the faster you can pay off loans with high rates, the less money you’ll owe in the long run.
Adjust Your Savings Strategy
As you advance in your career, you’ll likely see an uptick in your take-home pay. After a bonus, promotion, or new job, your first inclination may be to spend more because you’re earning more. While you deserve to celebrate your career wins, determine how you can maintain (or even accelerate) your savings progress as you increase your earning potential. If you’re earning more and you’re maintaining a manageable cost of living, consider putting extra income toward your 401(k) or another savings goal—like going from renter to homeowner—rather than spending.
Effectively managing your first salary and growing your savings is a crucial step towards financial stability and future success. By creating a budget, prioritizing savings, and seeking financial education, you can lay the foundation for a secure financial future. So, take charge of your finances and watch your savings grow alongside your career, your future self will thank you for it. Here's to a prosperous financial journey ahead!
When you’re ready to manage your first salary or take charge of your finances wherever you are in your career, check out our saving options so you can make the most of your money.