7 Money Management Tips for Your First Job

Congratulations on landing your first job! This is an exciting milestone that comes with new responsibilities, like managing your money. Whether you're earning a steady paycheck or navigating the complexities of employment benefits, it's crucial to establish good financial habits that help you thrive in your career.

In this article, we provide you with practical advice on how to effectively manage your money in your first job. From creating a budget to saving for the future and making smart investment decisions, we'll guide you towards long-term financial success. Here’s how to make the most of your new paycheck and employment benefits:

1. Set up a direct deposit 

Setting up a direct deposit is a convenient and secure way to receive your regular income or payments directly into your bank account. By opting for direct deposits, you can avoid the extra work or risks associated with depositing physical checks. If you haven’t established a checking account, you’ll need to do so to accept your direct deposit. Finding a checking account should be based on what’s important to you, like convenience and earning interest.

Setting up direct deposit is usually a straightforward process. Typically, you can complete the necessary forms through your employer's human resources department or directly through your employer’s online portal. By providing your bank account information and routing number, you can authorize the electronic transfer of your funds.

Remember to double-check the accuracy of your bank account details to ensure that your funds are deposited into the correct account. Once set up, you can relax knowing your paycheck is deposited directly into your account on payday, providing you with convenient and secure access to your money.

Tip: While your employer is setting up your direct deposit, it's a good idea to proactively confirm with them how you’ll be paid for your initial weeks of work. This way, you can stay informed and ensure a smooth transition during the setup process.

2. Create a budget

Creating a budget is one of the most important things you can do to manage your money effectively. Budgets help you track your income and expenses, grow your savings, set financial goals, categorize your expenses, reduce your debt and allocate funds to investments. They also establish healthy money management habits in the short-term that can help reduce financial stress and prevent overspending.

The first step in creating a budget is to track your income and expenses by gathering all your financial information, including income sources, bills, debts and expenses. Then, record your monthly living expenses – from food to gas for your car. Divide these expenses into your needs and wants. Once you identify your needs, you can calculate how much to put towards savings, debt and your other categories. Make sure to review your budget each month to ensure you’re working towards your goals and set up an appointment with an advisor or relationship banker if you have any questions.

Tip: We recommend using the 50/30/20 budgeting model: allocate 50% of your income towards financial obligations (like groceries and rent), 30% towards wants and 20% towards savings in a savings account or emergency fund.

3. Enroll in employer retirement plans

It’s never too early to start saving for retirement. Enrolling in your employer's retirement plan is a smart move to help secure your financial future. Many companies offer retirement plans, such as a 401(k), which provide tax advantages and the opportunity to save for retirement through payroll deductions. Here are a few reasons why it’s advantageous to enroll in your employer’s plan:

• Employer contributions: Many employers match a certain percentage of their employees’ contributions to their retirement plans. This means you can receive free money from your employer simply by contributing to your plan. 
• Tax benefits: Contributions are typically tax-deductible, which means that you can reduce your taxable income and save money on your taxes. 
• Compound interest: The earlier you start saving for retirement, the more time your money has to grow through compound interest. It not only earns you interest on your initial investment but also on the interest you've already earned. This compounding effect can supercharge your savings and make a significant difference in the long run.
•  Automate savings: Having your savings automated makes it easier to save consistently without active management.

Before enrolling, you should familiarize yourself with the retirement plan options offered by your employer, such as a 401(k) or Roth 401(k). Understand the eligibility requirements and any matching contributions your employer may offer. Review the plan's investment options and consider seeking advice from a financial professional if needed.

Once you have gathered all the necessary information, complete the enrollment process by filling out the required forms provided by your employer. Decide on the contribution amount you're comfortable with, keeping in mind any matching contributions available. Contributing to your retirement savings is a fluid process, so regularly review and adjust your contributions as your financial situation evolves. Adjustments can be made during future pay raises and bonuses, but always remember to pay yourself first. By allocating a small percentage a year from each pay raise, you increase the contribution level without impacting your current budget.

Tip: Adjustments can be made during future pay raises and bonuses, but always remember to pay yourself first. By allocating a small percentage a year from each pay raise, you increase the contribution level without impacting your current budget.

4. Start an emergency fund

Starting an emergency fund helps you get one step closer to financial stability. Unexpected expenses, such as medical emergencies, car repairs or job loss, can arise at any time and having an emergency fund will provide you with a financial cushion to navigate these challenges without incurring debt.

To start building your emergency fund, make it a habit to set aside a portion of each paycheck, even if it's a small amount. Your emergency fund should cover at least three to six months work of living expenses. You can also consider setting up an automatic transfer from your checking account to your emergency fund savings account each month. This way, you won't have to worry about manually transferring money and can stay on track with your savings goals.

It's advisable to keep your emergency fund in a separate savings account, distinct from your regular checking account. This separation will prevent you from easily dipping into your emergency fund for non-essential expenses. Look for a savings account to best fit your needs including low minimum balance requirements, competitive interest rates and automatic transfers.

5. Build your credit

Building credit helps you establish a solid financial foundation. A good credit history makes it easier to qualify for larger purchases and life events, like loans, renting an apartment, getting a mortgage and new credit cards, as it demonstrates your reliability as a borrower. Here are three recommendations for maintaining a solid credit score:

• Make timely payments: Pay all bills, including rent, utilities and credit card balances, before the due date. 
• Keep your credit utilization low: Credit utilization refers to the amount of credit you're using compared to your total credit limit. Aim to keep your credit utilization below 30%. 
• Avoid opening multiple new credit accounts at once. 
• Regularly monitor your credit report and score to track your progress and identify areas for improvement.

Building credit takes time and patience, but with responsible financial habits, you can establish a strong credit profile that will benefit you in the long run.

Tip: If you have limited or no credit history, consider applying for a secured credit card or becoming an authorized user on someone else's credit card to start building credit.

6. Pay off debt

Paying off debt moves you towards achieving financial freedom and reducing financial stress. Being debt-free also improves your credit score and allows you to focus or free up additional dollars for long-term goals, such as buying a house or saving for retirement.

Understand your debt situation by creating a comprehensive list of all your debts, including outstanding balances and interest rates. Make sure to incorporate debt repayment into your budget so you can keep this financial goal top of mind. On the day-to-day, you can cut back on unnecessary expenses and redirect those savings towards debt repayment.

As you get more comfortable with your plan, explore options like debt consolidation or balance transfers to simplify your payments and potentially lower interest rates. If you need assistance in deciding the best debt repayment for your financial situation, consider meeting with a financial advisor.

7. Start investing

Learning how to invest is a powerful tool to help you achieve financial success. By understanding the principles of investing, you can make your money work for you and grow your wealth over time. Investing allows you to take advantage of various opportunities in the financial markets, such as stocks, bonds, mutual funds and real estate, to potentially earn higher returns than traditional savings accounts.

To get started on your investment journey, it's highly recommended to seek the guidance of a financial advisor, who can provide valuable insights to help you make informed investment decisions. They'll take into account your financial goals, risk tolerance and time horizon to create a personalized investment plan to align with your needs. With their assistance, you can navigate the complexities of the market and develop a well-diversified portfolio that balances risk and potential returns.

By implementing these money management tips, you can establish healthy financial habits to serve you well throughout your career. Remember, financial success is a journey, and with discipline and perseverance, you can build a solid foundation for a prosperous future. Connect with an advisor to start your journey today and learn more about important money literacy topics on our Young Professional Resource Hub.