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Stepping foot into a career or new job adventure can be an exciting but overwhelming time. That change can also bring on quite a bit of financial anxiety, too. Having a career means you’re able to work toward a lifelong dream or that you may be able to afford some of those daily creature comforts. But before you run to the bank to cash that first paycheck, or before you start feeling overwhelmed with this newfound sense of financial responsibility, let’s equip you to enter this next important phase of your life making the right decisions and preparing a solid financial footing.
Start With A Budget. No matter which approach you learned in your early years – using a check register or a personal financial management tool - tracking the money coming in and going out of your accounts can be an important but eye-opening practice. This should be a starting point for all of your purchases, savings, and other financial decisions on a regular basis. You’ll first want to make sure you account for basics like rent, groceries, transportation, and any loans (student or otherwise) or bills. Then you’ll see how much is left over for things like saving efforts and entertainment.
After a few months of monitoring your accounts, you’ll have a pretty good idea of what you can spend each month and where you may need to adjust. It can be a little humbling at first especially if your paycheck doesn’t match your expectations of how you’ll spend it, but stick with it. As your paycheck grows, you will have more freedom to put your earnings to work the way you want - and you won’t have to worry about being underwater.
Ditch the Debt.
Did you know...
Firefly has a personal financial management solution built right into digital banking to help you categorize spending, set goals, and see trends in your accounts?
It can be tempting to sign up for another credit card when your wants seem a little bigger than your paycheck but focus on downsizing debt before you accumulate more of it. You likely already have student loans to pay for and perhaps a car loan or even medical bills to cover. You can focus on paying down one loan or bill at a time and, once the first is paid off, apply those funds to the next one to pay off your other loans more quickly.
The problem with carrying debt is it can inhibit you from having the freedom to pursue your goals. How will you be able to take a job if it doesn’t pay enough to cover your basic expenses? Having the financial agility to do what’s important to you – taking a trip or saving for a down payment on a house - comes from having financial margin; you’ll have more of that when you’ve paid back what you’ve borrowed.
Create an Emergency Fund.
Sometimes referred to as a rainy day fund, this is used to cover life’s unexpected expenses. Maybe your car needs a major repair or you broke your leg and your insurance doesn’t cover as much as you had expected. These funds are not
for vacations or shopping but necessary to consider in life.
The purpose of an emergency fund is to provide a backup plan while you’re covering your basic expenses and paying off your debts. It is often recommended to have a minimum of $500 - $1,000 set aside for this fund. Ideally, you should have 3 - 6 months’ worth of living expenses set aside, particularly in case of an unexpected loss of a job. It’s important to remember that life happens but being financially prepared can help alleviate a lot of stress associated with those surprises. Read more about saving for an emergency.
Put Your Money to Work.
Once you have a solid plan for managing your monthly expenses and some emergency savings, it may be time to start thinking about how you can get more out of your paychecks. Maybe you’d like to consider investing. The earlier you start investing, the more exponentially your wealth could grow. If you don’t feel equipped to enter the world of investing on your own, look for resources to help you get started or you can enlist the services of a financial advisor.
Another prudent way to put your money - and specifically your paycheck - to work is by participating in your employer’s retirement savings plan if they offer one. Many companies will offer to match or even exceed the percentage of your paycheck that you contribute to a plan. Think of this as a bonus to your paycheck every pay period which will largely grow in value as time goes on.
While we’re on the topic of employer benefits, make sure to explore their health insurance plans and even short- and long-term disability options. It’s more likely you’ll need the health insurance than the disability insurance, but having to deal with unexpected expenses resulting from a trip to the hospital or long-term injury could set you back financially months if not years. The minimal amount you contribute from your paycheck will be well worth what you get out of the peace of mind.
Starting with these basic guidelines can help you confidently enter the career phase of your life with financial confidence. Take the time now to set yourself up for success – you’ll be happy you did.
Contents of this blog article are intended to provide you with a general understanding of the subject matter. However, it is not intended to provide legal, accounting, or other professional advice and should not be relied on as such. Information may have changed since the publication date.