Landing your first job is an exciting moment. You’ll spend days thinking about the salary and can’t wait for the payday. However, as many people will tell you, you’ll run out of money faster than you thought if you don’t budget well.
When you get your first salary, you probably don’t have many responsibilities making it an ideal time to make life-transforming financial decisions.
To build financial discipline, start creating financial awareness right from the start. It’s okay to celebrate your first salary but have a financial plan that guides your spending. Here are things you should start doing soon after your first payday.
Make a Budget
Do you know how much you’ll take home after tax deductions? It would help if you found out to make your budget more accurate. You’ll also avoid disappointments when you bring home less money than you anticipated.
At this point, think about your monthly expenditure. Include groceries, commuting costs, and any other monthly spending.
You might also want to think about acquiring a credit card but first, get to understand personal loan vs credit card debt. If you can make all your credit card payments on time, the card can be an excellent budgeting tool and can help improve your credit score. However, you need to be disciplined.
Think About Loan Repayments
If you have student loans or other types of loans, make a repayment plan now. The sooner you get the loans out of your way, the easier your financial life will be. Many institutions expect you to start making education loan repayments six months after graduation. If you were lucky to land a job quickly, start earlier at your pace.
Start Saving Now
It’s not too early to start saving. When you start early, you build a savings culture that you hold on to even in your old age. It’s not too early to start thinking and planning your retirement. Look at the retirement accounts and ask your employer whether they have an employer-sponsored retirement account. If your employer contributes a 6% match, plan to do the same. You can also open an independent retirement account.
Other than saving for your retirement, think about your plans. Are you planning a vacation or a huge purchase such as a car? It’s not too late to think about setting some money aside for a house. Decide how much you’ll be saving each month, depending on your future goals.
Have an Emergency Kitty
You can never anticipate an emergency such as an illness, a car breakdown, or even a job loss. Having some money aside enables you to comfortably take care of the emergency without affecting your savings or borrowing. If you lose the job one or two years after employment, have enough cash to cushion you for several months as you look for another job.
It’s also not too early to think about getting a second source of income. It will help you realize financial stability faster. Because most first jobs don’t pay as much as you’d want, having a side business makes you live a more comfortable life and cushions you from financial stress if you lose the job.