Getting that first job can be very exciting and stressful at the same time. You're overwhelmed with new changes, commitments, and opportunities. And it's OK to have a lot of questions.
But perhaps one of the biggest challenges you'll have to face is how to make the most of your first paychecks. After all, most of us are never taught the basics of financial management.
To help, we outline six smart ways to save money from your first job.
Avoid Lifestyle Inflation
Awed by the excitement of landing on their first job, many young adults succumb to lifestyle inflation to keep up with peers. This is a dangerous path since it erodes any financial discipline you may have had.
Financial experts advocate checking your social circle to avoid peer-pressure spending. Others recommend making friends with individuals who have narrowly escaped personal bankruptcy or experienced acute financial strain.
Such people understand the importance of sound money management and are more likely to help you save.
Adjust Your Budget To Reflect Your Current Situation
If you've been in college before landing on your first job, your finances were relatively straightforward. You probably had some basic bills to pay.
But right now, you're starting a new life in the workforce. And it comes with lots of cash flow changes and financial needs. Therefore, it is important to re-adjust your budget as soon as possible to reflect your current situation.
Once you know how much you will be earning after taxes, study your situation to determine your expenses. Take note of how much rent you will be paying every month and decide whether you want to move to another place or not.
Keep Housing Costs Low
If you decide to move to a nicer place, strive to keep housing costs as low as possible. Ideally, you shouldn't spend more than a third of your income on housing. But this may not be practical in many metropolitan areas.
To save more money, consider living with roommates or looking for a cheaper place in the neighborhood.
Set Specific Saving Goals For Big Expenses In Future
Big purchases are inevitable in the future. Maybe you will buy a car, or purchase your first home. The sooner you start saving for these expenses the better. And the best time is right now when you don't have a lot of financial commitments.
Determine these specific goals and have a certain amount of money saved automatically. If you do it from your first paycheck, you'll never see that money and it ensures you're always consistent with your savings.
You may not need financial assistance in your first week on the job. But once you've earned real paychecks for some time and seem to struggle to hit your goals, it may be time to find professional help.
Most financial planners will help you make sense of your finances and identify long-term strategies. So don't be shy to get help. Most people who have worked with financial experts report great results.
Develop The Habit Of Reviewing Your Finances
Although it is great to automate your finances, it is wise to have the habit of reviewing your savings goals and retirement contributions at least once per year.
This will help you answer the following questions: Are you saving enough for your future? Do you have any leftovers to start a side hustle? What can you do to save more?
When reviewing your finances, be honest with yourself. Allow yourself money to do the things you love. But keep in mind that your future self will thank you for starting to set aside money right now.
After many years in school, getting your first job is a great achievement. However, it is also the right time to get your financial life in order. We hope these strategies help you get the right footing. All the best!