Your first post-college job brings changes on a number of fronts. Among those is likely more money than you’re used to bringing home. But what to do with those first paychecks? Here’s how to make your first paychecks part of a strong financial future.
Break down your pay
Before you start finding ways to spend all of your new income, think about how much money you actually have. With your first check, you’ll notice your take home pay is lower than what you expected. That’s because your employer has taken out required tax deductions like federal, state, Medicare and, possibly, Social Security. Also you may have chosen employer electives like healthcare benefits, life or disability insurance that will reduce the amount of your take home pay, giving you a final number to allocate into other necessary categories.
Take care of fixed expenses
One of the best investments you can make in yourself is to reduce your debt. Start paying back student loans as soon as possible. If you’re able, double up on payments each month to reduce the amount of interest paid and the length of time spent repaying them. Apply the same strategy if you have credit card debt.
Get covered for the short- and long-term
Once your fixed expenses are taken care of you can split what’s leftover for other priorities in your life. Don’t overlook saving for essential needs. An emergency fund is a good way to save about six months of living expenses in case of an unexpected layoff, major car repair or illness.
Use your Share Savings Account to have a fixed amount from your take home pay direct deposited each pay period. Odds are if you don’t see it, you won’t miss it.
Set aside spending money
Just because your checking account balance is starting to grow, doesn't mean you need to spend it. On the flip side, don't limit yourself entirely either. Just make sure you're rewarding yourself with money you don't need elsewhere.
It’ll take some time to find the right mix of savings, debt payments and spending money that will help you achieve long-term financial goals plus allow you to enjoy life now. So don’t give up. If you need additional help, use Compass, our no-cost money management tool. You can use Compass to create budgets, and track and manage your spending.