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Make the Most of Your Paycheck from Your First Job


Getting that first job after college or high school is a very exciting, yet stressful event. You’re probably overwhelmed with many new challenges, opportunities, commitments, and have a lot of questions. One of the biggest changes may be in regards to money.

This new job may provide a significant increase in cash flow. While it may seem like you’ll now have a lot of money, this is a critical time to begin managing your money wisely. This includes creating a budget to help you pay off debt, student loans, develop savings, and begin investing for retirement.

Create a Budget

If you’ve been in school prior to this new job, your finances were probably relatively simple. You had some basic bills and utilities to pay, and your education may have been funded by outside sources or student loans. Now that you are ready to begin life in the workforce, your cash flow needs will change significantly.

Once you have an idea of how much your paychecks will be, it is time to sit down and determine what your expenses are. How much is rent? Will you be moving to a nicer place? Buying a car? How long before you have to begin paying back the student loans? These items will play an important role in determining where your money has to go.

Creating a budget doesn’t have to be difficult and it can be done in a few easy steps. It is important that you establish this spending plan as soon as possible so that you don’t find yourself in financial trouble later on.

Tackle Your Debt

With this new source of income, it is a perfect time to get serious about repaying your debt. If you have credit cards, you may have become used to only paying the minimum payment each month. Break the minimum payment habit as soon as possible! Minimum payments can drag your repayment out to ten years or more, costing hundreds or thousands in interest. Make it a priority to accelerate the high-interest credit card debt.

If you have student loans, you generally have three to six months before payments begin. Don’t use this grace period to rest on your laurels, but begin to plan for the payments before they start. Find out how much the payment will be and factor it into your budget now. If your lender offers automatic electronic payment, consider setting up monthly or bi-weekly payments to come right out of your bank account.

Develop a Savings Plan

Now that you’re on your own and have a steady stream of income, you should begin saving a little bit of money each paycheck for an emergency fund. Having an emergency savings fund will help you out in a jam so that you don’t have to rely on high-interest credit cards or face a financial crisis.

The best way to begin saving is to create an automatic savings plan. If you have a set amount of money being set aside from each paycheck automatically, it is impossible to forget. In addition, once the money is saved automatically, after a few paychecks, you won’t even miss the money.

Begin Saving for Retirement

If you’re like most young people starting out in your first job, the thought of retirement seems like an eternity. 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.

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. If your employer doesn’t sponsor a plan, the best thing to do would be to consider opening an IRA.

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