So you finally landed your first real job. Congrats! If you have a chance, take some time to celebrate and relax until it’s time for your to embark in your professional journey.
Before settling into your work environment and all that comes with it, you may have a few laundry list items to take care of in order to put yourself in the best position to succeed.
Indeed, landing your job is just the beginning. You won’t become successful by just coasting through your 9 to 5. You will have to take a few action steps if you’re looking for some real results.
Here are a few tips to get you started.
Pull all your accounts and start working on a budget
Start by taking a thorough look at your overall finances. If you want to start making progress, knowing where you are is critical. So get a pen and paper and start listing out all your debts, bank accounts, investments, bills, etc. You will quickly realize that it’s much easier to start crafting your game plan once you have a sense of your situation.
Once you have a clear picture, it’s now time to start working on your first budget. The idea is that you’re trying to build wealth, so knowing how much money you have available after expenses is critical.
If you fall off the wagon a few times, don’t overreact. I’ve been budgeting for almost two years now and I still make mistakes from time to time. A budget is just a guideline on how you can reach your goals. If you don’t fulfill it completely on a given period, it’s not the end of the world.
Automate as much as you can
One of the biggest parts of my personal finance life is automation. I find it so helpful to be able to set and forget things so that I can save my brainpower on things that really matter. Most of my bills are paid automatically with my credit card, which is in turn paid in full (also automatically) every period.
I do the same with saving and investing. Every paycheck, a certain amount gets sent to my savings accounts an my 401 (k) before I even see it. That way, when I get paid, I don’t have to worry about overspending and I actually take care of my financial goals. Such a set up makes my life so much easier!
Get your employer’s full 401 (k) match
There’s a good chance that your new employer offers some type of retirement program. If it comes with a match, make sure you contribute enough to take full advantage of it. For example, a 50% match on a 6% contribution is an automatic 50% return.
I can think of many reasons why we all should invest in our company 401 (k), but this one is definitely the biggest one. Even if the investment choices are lousy, it’s just hard to turn down free money.
Strive for Financial Independence
In addition to your employer sponsored plan, you want to take matters into your own hands and contribute as much as possible to your retirement account. Especially when you have no debt.
One great way to do so is to open an IRA or a ROTH IRA. These accounts allow you to invest money up to a certain amount with tax benefits similar to the ones in employee sponsored accounts.
In terms of investments, I tend to stay on the cheap side. I currently am 100% invested in an S&P index fund. I’m not a fan of individual stocks, but they can also work if you’re willing to do the proper reseach. Once I open my Roth IRA, I’ll probably use a total stock market fund. No matter what you choose, I think the most important things are to be mindful of fees and to diversify.
Buy some long term disability insurance
When you’re getting a paycheck every month or every two weeks, it’s easy to think that things will always be as predictable. But the reality is that you never know what may happen in the future. As a result, it’s important to plan for the worse.
Long term disability due to an injury or accident is one of the things we should always be prepared for. The worst time to be stressing about paying your bills is when you can’t physically work to produce an income. This is why you want to have your income already replaced if you are in such a situation. That way you can focus more on your health and less on how you’re going to make your next mortgage payment.
Some employers offer some kind of coverage, usually short term in nature. Although these perks can be helpful, they’re nothing close to being enough in case of a serious injury. As a result, I suggest you shop around and find a policy that will take care of your needs.
Skip The Car Note and other big expenses
Seriously, think twice before going to the dealership. If you live in an urban area, consider biking or using public transportation. You can even walk and save the money you would spend on both transportation and a gym membership.
Other than transportation, housing is the other big expense that comes to mind. If you’re just starting out with your career, chances are you are thinking of renting for a while. As you will quickly find out, housing is by far the most expensive item in your budget.
To reduce the damage, you can get a roommate or two, live in a less crowded neighborhood while making sure you still have access to work, and avoid luxury apartment complexes.
What are some of the money lessons you learned when you got your first job? I’m all ears!