You got your first job – that’s awesome! A paycheck is coming. But where should that new cash go? Let’s get money smart.
Good money habits now lead to a strong financial future. When you start working, it’s wise to make solid money plans. Living within a budget and saving cash are excellent first steps.
Investing early means decades for that money to potentially grow huge. Paying off debts like student loans prevents interest fees from adding up. Building emergency savings provides a safety net for unpredictable costs. Taking advantage of employer benefits like retirement accounts is also key.
It may seem complicated at first, but it gets easier. The sooner you begin using your income wisely, the better. Smart financial foundations set you up for stability and success.
1. Open a Savings Account
Putting cash aside in savings is very wise. It lets you…
- Save for short-term wants like trips or new cars
- Save for long-term needs like homes or retirement funds
- Build a safety net for unexpected costs or job loss
A smart first step is opening a high-yield savings account. These pay more interest than checking accounts. More interest equals more growth. Shop around to find an account with a high-interest rate.
Next, set up automatic transfers from your checking to your savings. Automatic transfers remove the temptation to spend that cash on other things. Every paycheck, some money will move straight to your savings stash.
According to Businesscasestudies, the younger generation (22-29) tends to save less, while those above 55 tend to save more, so it becomes important to start early to have less burden to save during your pre-retirement years.
Save for Short-Term Goals
Short-term goals are things you want to achieve in the next few years. A new computer, vacation, or down payment on a car is attainable wishes. Separate sub-accounts can help organize short-term savings for each goal.
Save for Long-Term Goals
Long-term goals are bigger dreams further into the future. A home, starting a business, your retirement – think decades away. Long-term savings accounts let this money steadily grow over many years.
2. Pay Down Debt
If you have debt, pay it off quickly. Debt costs money. Credit cards and loans charge interest that adds up fast. The sooner you ditch debt, the more cash you keep.
First, list out all your debts from the highest interest rate down. Pay minimum amounts on everything except the highest-interest debt. Put as much extra money as possible towards that costly debt.
Once the highest-interest debt is gone, roll payments to the next. Repeat this debt snowball approach until you owe nothing. Making over the minimum payments is key to becoming debt-free faster.
Get instalment loans from direct lenders to consolidate your loans. This combines multiple debts into one new fixed-rate loan. Your total interest rate goes down, and you owe just one payment.
These loans are best for debt consolidation because:
- They have simple applications with fast approval and funding times
- The rates are typically lower than credit cards or other loans
- You can get a fixed interest rate and set repayment schedule
Avoid taking on any new debt until your current debt is erased. The new debt will just delay or restart the debt cycle. Stay disciplined about using cash or debit cards instead of credit.
Other Debt Payment Ways:
| Debt Payment Way | Definition |
| Debt Avalanche | Pay all high-interest debts, then attack one debt at a time. |
| Debt Consolidation | Combine multiple debts into one new fixed-rate loan. |
| Balance Transfers | Move debt to a new 0% interest credit card. |
| Debt Settlement | Pay less than owed on delinquent/old debts. |
3. Build an Emergency Fund
An emergency fund is cash for unpredictable events or rough times. You get sick, lose your job, major home repair – covered! Experts advise saving three to six months’ worth of living costs.
Let’s look at how to set up the emergency fund.
- Open a separate, dedicated savings account for these surprise expenses
- Automatic transfers make it easy to contribute money regularly
- Don’t touch this money unless it’s a legitimate crisis
- Once drained, focus on rebuilding the emergency fund again
According to Nathan W. Morris, Saving is the seed from which your tree of wealth sprouts. In the UK, only 38% have enough savings to cover emergencies.
However, what concerns the young adults the most?
4. Start Investing Early
Investing money is wise when you start a new job. It allows your cash to grow and compound over time. The earlier you begin, the more your money can multiply.
First, understand some investing basics like risk, diversification, and asset allocation. Learn about different investment types – stocks, bonds, funds etc. Knowledge helps make smart choices to reach your money goals.
Consider low-cost index funds or exchange-traded funds (ETFs) to start.
- These track overall stock/bond market performance with tiny fees
- Instant diversification across hundreds or thousands of different investments
- Simple, hands-off investing approach ideal for novice, long-term investors
A research by Nationwidemediacentre suggests that people impulsively spend a big chunk of their discretionary income within 48 hours of getting paid, often regretting these spur-of-the-moment purchases later on.
So it will be better to invest in a spending amount than spend impulsively and regret it later. Thanks to fractional share investing, you can invest in small amounts. Putting away £25 or £50 per month is perfectly fine. What matters is consistent, automated contributions over years and decades.
According to Barclays, investing at age 25 could gain £500,000 more by retirement. The earlier you start investing, the greater the growth opportunity.
5. Maximize Employer Benefits
Next, take full advantage of employer-sponsored investment and benefits plans. Enrol in any workplace health insurance, life insurance, and disability offerings. These coverages protect your income and assets if disaster strikes.
You can get pay weekly loans and can provide cash for occasional money crunches. These instalment loans from direct lenders offer fast, affordable financing. Repaying weekly aligns nicely with your pay schedule for convenience.
For retirement, invest the maximum allowed in accounts like 401(k)s.
- Tax-advantaged accounts like 401(k)s and IRAs help faster growth
- If employers match contributions, you get instant “free” money
- Automatic payroll deductions make consistently investing simple and painless
Some jobs offer tuition assistance or reimbursements for professional development programs. Participating in these can increase skills, job prospects, and future earnings. Wellness program participation may also qualify for health insurance discounts.
Conclusion
So there you have some top money moves to pursue. When you first start working, it’s prime money management time! Making good choices now can mean awesome financial wins later.
Use a budget to control spending and prioritize goals. Save regularly. Invest early while you have decades of growth potential. Seek guidance from financial advisors if you need expert help.
Building wealth takes patience and commitment over many years ahead. But you’ll be grateful you started strong money habits early. In the future, you will look back and be thankful!
Developing financial wellness skills sets you up for lifelong prosperity. It all begins with those first smart money moves. Start planting prosperous seeds now and enjoy the bountiful harvest!