It’s an exciting time. You’re getting out there into the “real” world for the first time. You’re responsible for your finances. But what do you do with your first paycheck? How do you make sure that you are using that paycheck wisely?
First, Make Sure You are Getting a Paycheck
One of the most disappointing things in life is graduating and then doing a job that has nothing to do with your degree. But sometimes it’s necessary.
My first job out of college was cashiering at a farm and ranch store. I only got the job because my parents knew the owner. It was not what I wanted to do, but I did it for about 10 months anyway.
I was able to get a job in my field, but the first job I had with my shiny new degree was a total disappointment. But it paid the bills.
Once you have that first job, it’s time to make sure you are preparing for your financial future.
1. Contribute to Retirement
If your company offers a retirement plan, take advantage. Sign up and start having a portion of each paycheck put toward retirement. If your company offers a matching contribution, so much the better.
The earlier you start with retirement investing, the better off you’ll be in the long run. You might not be able to sign up for a retirement account with your first paycheck, but keep it in mind for when you are eligible to start getting benefits.
You don’t need to put in a ton of money right now, but anything to start is a good idea. You can increase your contributions to your retirement later.
2. Work on Paying Down Debt
If you’re like most grads, you probably have student loan debt. You might also have credit card debt or a car loan.
Whatever debt you have, now is the time to start tackling that debt. First, start by consolidating your student loan debt. Get your federal programs in one place. Try to do the same with your private loans, separately.
Before you get too crazy about paying off your student loans quickly, look at what other debt you have. You want to start by paying off high-interest debt, like credit cards and maybe your car loan before you move to student loan debt.
Put a portion of your paycheck toward paying down debt so you can work toward debt freedom sooner.
3. Pay Your Bills
Do you have a spending plan in place?
If not, create one ASAP.
You need to be able to pay your most important bills. Make a priority list of the things that need to be taken care of. Chances are, your list includes (but isn’t limited to):
- Gas (to get to and from work)
Think about the items you need to cover in order to survive.
In some cases, you might have to cut back on some of your expenses or take other steps to ensure that you can meet your obligations. Maybe you need to get roommates or move back in with your parents.
You need to stay on top of the situation now that you are making money. Make sure the necessities are covered as you start working with your first paycheck.
4. Consider Your Short-Term Goals
One of the great things about having a job and earning money is that you can start thinking of other things to do with the money.
Sit down and think of some of your goals. Once you have taken care of long-term goals like paying down debt and building your retirement nest egg, it’s time to think about the next step.
Do you want to buy a house sometimes? Perhaps you hope to save up for a wedding or a trip around the world. Are you ready to start a family.
Now that you have your first paycheck, sit down and think about what you want your life to look like. See if you can put a little bit toward your short-term goals.
The reality is that you probably won’t be able to get everything done right now. Instead, it’s about putting together a plan that allows you to work toward different goals that can help you figure out how to make the most of your future.