By Clare Levison, author of “Frugal Isn’t Cheap: Spend Less, Save More, and Live Better“
As many college students are preparing to start a new school year, grads all across the country are finding themselves starting new jobs, meeting new co-workers, and of course, earning that all important paycheck.
Here are some tips for navigating the financial waters of a first job and even if you’re not brand new to the workforce, this can be a great time for a quick financial check-up:
1. Get your paperwork in order.
Make sure that all of your important documents, such as your birth certificate, social security card, passport, and any other significant documents, are kept together in an easy to locate place.
You’ll need to show these documents to your new employer to prove your citizenship and eligibility for employment. Always store them in a safe place, and make sure you return them to that place each and every time you take them out. You’ll need to be able to access and provide these kinds of documents at many different times throughout your life.
In addition, create a tax file that contains all of the documentation you’ll need when it comes time to file your taxes. This file should include any receipts, bank documents, etc. that you collect throughout the year, as well as your W-2 and any other income and expense documentation that you receive at the end of the year.
2. Sign up for direct deposit.
Nearly all employers will require employees to sign up for direct deposit, and normally you can request that your paycheck be deposited into more than one account. This is great news, because it allows you the opportunity to sign up to have a set amount automatically sent from your paycheck into savings. Having a direct deposit into savings goes along with the out of sight out of mind principle. If you never see the money, you’ll be less likely to spend it and instead you can begin accumulating a nice chunk of change for funding long-term goals such as buying a home.
Typically you’ll specify what dollar amount from each paycheck you want put into your savings account and the remainder can go into checking.
3. Get a jump on retirement.
I know what you might be thinking – I’m just starting my first real job and I already need to think about retirement? Retirement may seem like it’s a long way off, but the sooner you start saving for it the more time you’ll have to build that nest egg, and some day you’ll be glad you did. As time goes on, we tend to have more financial responsibilities not less. We get married, have children, buy a home, the list goes on and on. This is a great time for you to begin making the most of your money and getting into the habit of making saving a priority.
Many employers offer a 401k plan, or something similar. This is an investment account in which your employer will match the contributions you make, up to a certain amount. Always contribute, at a minimum, what your employer will match. The total amount you contribute will depend on your personal financial situation but remember – the sooner you start saving, the more time those dollars will have to accumulate and grow.
4. Create a budget.
Hopefully, you went through the budgeting process in college when you had a limited income and needed a plan for getting bills paid, as well as having some spending money each month. Budgeting in the real world is no different. If you’re not used to budgeting, there’s no time like the present to start. Just add up all your income and subtract all your expenses, being sure to take into account the amount you’ll be setting aside for savings. If the number you come up with is negative, you’ll need to trim some of your expenses in order to get your budget in balance. Don’t rely on credit cards or other loans for those overages.
Following a budget will help keep you debt free.
5. Don’t be afraid to ask questions.
A lot of information will be thrown at you when you start a job. Be sure to read through all the material you’re provided with, and don’t be afraid to ask for help, advice, or clarification on anything you don’t understand. Your employer’s human resource department is used to fielding lots of questions from new employees. Seek help from them when you need it.
Starting that first job is such an exciting time in the life of a new grad. Getting your financial ducks in a row can get things off on the right foot, and being smart and organized with your money will reap rewards for years to come.
Clare K. Levison is a certified public accountant and author of “Frugal Isn’t Cheap: Spend Less, Save More, and Live Better“. Levison is a national financial literacy spokesperson for the American Institute of Certified Public Accountants (AICPA) and serves as a member of their National Financial Literacy Commission. She has served as a member of the Virginia Society of Certified Public Accountants (VSCPA) Board of Directors and was named one of the 2010 Top Five CPAs Under Thirty-Five by the VSCPA.