I've Got My First Job! Now What?

Landing your first job is an exciting achievement and a significant step towards financial independence. As you begin earning a regular paycheck, it’s important to make informed decisions about how to manage your money. Keep reading to learn how to start building a solid financial foundation.

1. Do I need a budget?

Before diving into the details of saving, spending, and managing your new income, the very first step you should take is setting up a budget. Establishing a budget gives you a clear view of your financial landscape by letting you track your income, plan for expenses, and set savings goals that make sense for you. To help you start, download our practical, free budget worksheet.

Set up direct deposit so that your funds are available immediately and you don’t have to keep track of a paycheck. Look for checking accounts that provide funds as soon as they’re available, like Texell’s Early Payday, so that you don’t have to wait for pay day and may get paid up to two days early.

2. Save or Spend?

While it may be tempting to spend your first paychecks, establishing smart saving habits early can make a major impact in the long run. Use the 50/30/20 rule as a guideline:

• 50% for needs, such as rent, groceries, gas, and bills
• 30% for wants, including dining out and entertainment
• 20% for savings and debt repayment

Begin by tracking your expenses for at least a month. Understanding your spending patterns allows you to identify areas where you can cut back and increase your savings. Creating a budget tailored to your income and lifestyle can help you stay on track and avoid overspending.

Prioritize paying off high-interest debt, such as credit cards, before allocating funds to discretionary purchases. Additionally, consider setting financial goals, whether it’s building an emergency fund, saving for a big purchase, or investing for the future. These can motivate you to manage your money more intentionally.

Setting up automatic transfers to a savings account can help you consistently set aside money without having to think about it. Automatic transfers help build your emergency fund, and you should have enough to cover three to six months of living expenses.

For debt management, there are two ideal methods for paying off debt: debt snowball or debt avalanche. If there is any debt that you’re carrying month to month, it is recommended to follow these methods to help you pay off what you owe quickly and effectively.

Saving for a used car and paying for it in cash is a smart financial decision that can help you avoid the extra costs and stress that come with financing. By paying cash, you eliminate interest charges and lender fees, while also avoiding the risk of your car depreciating faster than you can pay off the loan. Most importantly, paying in cash means you own your car outright with no monthly payments, giving you greater flexibility in your budget and peace of mind about our financial obligations.

3. What’s a 401(k), and Should I Care?

A 401(k) is an employer-sponsored retirement savings plan that allows employees to contribute a portion of their pre-tax salary to a retirement account. Your employer often matches these contributions, and the money grows tax-deferred until retirement. Start your retirement fund early and strive to contribute the amount that your employer matches, if not more.

If you’re not eligible for a 401(k) or your employer doesn’t offer one, consider opening an Individual Retirement Arrangement (IRA). These also offer tax benefits and a way to grow your money long-term. Traditional IRAs are typically funded with pre-tax dollars, meaning you pay taxes when you withdraw in retirement, while Roth IRAs are funded with after-tax dollars, so withdrawals are tax-free. Roth IRAs are also the most advantageous option starting out. Consult a financial or tax advisor to discuss what type of account is best for you.

You may want to explore other investment options, like certificates of deposit or money market accounts, to build your investment portfolio. Texell offers several investment options with a variety of terms and rates. If you need help deciding when and how to start investing, ask your human resources department if they provide sessions with a financial advisor. Many companies do at no cost to you, and their valuable advice comes from years of experience.

4. Do I Really Need Insurance?

Life insurance is important at any age, not just when you have children. For many people without dependents, the coverage provided by your employer may be sufficient for your needs. Take advantage of any benefits your company offers, including accidental death, disability, heath, life insurance, and more. Once you have insurance policies, review them annually to see if you need to make changes or add beneficiaries. For more information, read How Much Life Insurance Do You Need?

Consider setting up a health savings account to build funds for health costs. Deposits are tax-deductible, interest accrued is tax-deferred, and withdrawals are tax-free if they’re used for qualified medical expenses. You can invest the funds in your HSA, making it a powerful long-term savings tool. If your employer offers HSA or flexible spending account options, weigh the benefits and choose what fits your needs and lifestyle.

5. What Future Plans Do I Need to Save For?

Whether you’re single or married, you probably have big plans for your future that may require big spending. Maybe you have a vacation spot that you’ve dreamed of for years. Start allocating funds to a designated savings account now and plan for when that day will become a reality.

If you’ve dreamed of owning your own home, it’s recommended that you have 30% of the purchase saved for the down payment. Find more tips about saving for your first home in articles about homeownership, and when you’re ready to learn more or take the next step, read First-time Homebuyer Guide - Part 1 for helpful resources and guidance.

Managing your money wisely from the start can set you up for long-term financial success. By developing good habits early, like saving consistently and budgeting with intention, you’ll be better prepared for both expected and unexpected life events. With a little planning and guidance, your first job can be the start of a confident, financially secure future.