What To Do With Your First Paycheck

Your FIRST PAYCHECK is coming- LIFE IS GOOD! Now what? How many times have you heard older folks/parents say “If I knew then what I know now, I’d be retired (or living in Florida, or be living in a big house etc., etc., etc.)” or the other statement you hear “Boy did I throw away money when I was young!” You are getting your first pay check – what should you do?

First Paycheck

First Paycheck!

The first question to answer is, what is your employer offering to you in benefits? Check out if they offer a 401(k) match! This is a no-brainer, especially since your employer gives matching funds. This is like receiving free money, plus it’s tax-free. Maximize your contribution. Even if your employer doesn’t give matching funds for a 401(k) plan but still offers a plan, contribute and get it started. It is still income that won’t be taxed.

401(k) account

A 401(k) is a savings account that will enable you to both retire and enjoy days, weeks, months and even years not working. If your company offers a 401(k), open an account. If you think, “Retirement is so far off, I don’t need to worry about it now,” consider this: You’ll need to save a huge sum in order to retire. It’s never too early to start saving. The earlier you start saving, the easier it is to save because the longer your investments have to grow. Additionally, you will pay less in taxes.

401(k) match

It’s best to start to get what’s called your “company match.” That’s free money that your company will give you as long you contribute a certain amount to your 401(k). Not all companies offer a match. About 40% of workers are offered a 401(k) match. If you’re in that group, then find out what you need to do to get the match, even if the match only begins after you’ve been at the company.

  • Other benefits/discounts you need to educate yourself from your employer is:
  • Life/health insurance (including dental and vision)
  • Computer sales
  • Cell phones(which includes apps)
  • Gym memberships
  • Public transportation discounts
  • Car buying discounts
  • Even athletic and concert events

Budgeting your finances

What’s the next step? Make a budget. Have your paycheck go into a direct deposit account. I recommend the 90/10% rule. Send 90% to your checking account and 10% to your saving account. Do Bank/Credit Union shopping! Choose a bank that gives interest on savings AND checking and possible. There are differences offered in interest given, free checking and low credit card services offered by banks and credit unions. Online banking also has many appealing options. Now build your monthly budget from the 90% in your checking account. For everybody the requirements are different – rent, transportation, insurance, student loans, etc. are all variables. Ask questions like “How much should I have in additional savings after my 401(k) contributions?” “How much do I let that 10% grow to with my monthly deposits?” “What happens if you lose your job?” “How many months is it going to take to land another job?” The amount saved is what makes you secure.

Another strategy is to target your savings towards a goal. There is a huge upside to savings – who is opposed to great vacations like skiing or doing beach time? Having money to get cheap auto loans or money down to buy your first condo, townhouse or home are benefits driven by your personnel goals. A possible rule of thumb is whatever money you have in your pocket you will usually spend. If you take your savings off the table, it has a chance to work for you!

Compound interest

Now the last step – research compound interest and see many ways you can calculate your gains. A little financial discipline goes a long way. Congratulate yourself, you have got a job, which is not an easy thing in today’s economy. I hope you enjoyed reading this blog as much as I enjoyed writing it. Happy saving!