Getting your first paycheck is exciting, but the last thing you want is to make the mistake of overspending your income only to regret it years later. Having financial management skills is a step in the right direction.
Photo credit: Karolina
The constant job search seems to have finally paid off. Your dream job is now a reality. While your job hunting days are over, you now have to learn how to plan and live off your paycheck. This is part of the new term commonly known as ‘adulting’.
An entry-level salary varies depending on the skills you have, job description and the job industry you are in. Either way after negotiating on your salary expectation, you need to be strategic on how to spend it. Finances are a critical part of your career. Documents like bank statements, tax returns, credit card information etc. need to be organized and kept safely. You need to be well prepared and plan carefully. Here are tips on how to budget your entry-level salary.
Keep track of your spending
The common mistake that many newly employed graduates make is ignoring their spending. In as much as you are making your payments on time, you also need to calculate just how much you are spending. To do this, you need to compare your actual income with your monthly spending. You need to make a list of your monthly income from your job and side hustle (if you have one). Then add up the amount. Next, you need to add up your monthly expenses from things like rent, groceries, loan repayments and so on. Once that is done, subtract your total expenses from your total income. The answer you get can be a positive, negative number or you could break even. If it is a negative number then you need to adjust your budget by cutting down expenses.
Have a savings plan
This comes as no surprise that saving is important when it comes to managing your finances. A guide to help you make a good savings plan and limit overspending is the 50/20/30 rule. In this rule, 50% of your salary goes into paying for essentials like rent, utilities and car payments. 30% is allocated to your wants like shopping, dining out and vacations. The other 20% of your paycheck is kept in a savings account or used for debt repayment. The earlier you start this habit the better it is for your future. In case you have any financial issues, an emergency fund will definitely help.
Seek professional help
We all need professional help at some point in our lives. This is no different when it comes to your financial status. Most billionaires have an accountant to keep track of how their money is used. That is why they are still billionaires. Now you may not be able to afford a private accountant but there is another option for you. You can seek financial assistance from Fuzu’s career coaches who are easily accessible and affordable. They will answer your questions and help you understand how to keep your finances intact. There are also courses you can take on Fuzu to learn more about financial planning and how to apply it. Set aside some time, like 30 minutes a week, to equip yourself with the necessary skills.
Set financial goals
Writing down your career goals gives you a better chance of achieving them. This also applies to your financial goals. List them into three categories: short-term, medium-term and long-term.
Short-term goals can include buying a new phone or settling a pending loan.
Medium-term goals are buying your dream car
Long-term goals are retiring and venturing into other lines of business.
The point is to specifically describe what you want to achieve with your money for each category. Be sure to include numbers and dates. For example, How much do you want to invest and by what date? Keep working towards achieving these goals first.
Avoid compulsive buying
It is tempting to spend your first salary on luxurious things like designer shoes and the latest technology. You want to treat yourself and give in to your cravings. The problem with that is as you continue to dig deeper into your finances, it will eventually lead to a huge financial debt. When you run out of cash, your first instinct is to use your credit cards. The smart thing is to be more cautious about making such big purchases in the beginning and instead choose to keep your budget on track.
Most companies are known to provide certain reimbursements to their employees. Your new job probably has benefits like transportation cost, internet connection, health care, gym membership etc. If you aren’t sure what they are or how to access them just set up a time to meet with HR to go through them. You can cut down your expenses by taking advantage of what is offered. Remember the company benefits have been given to you as a trusted employee and so use it as such.
Getting your first paycheck is exciting but you need to plan ahead. You worked hard to get your dream job. The last thing you want is to make the mistake of overspending your income only to regret it years later. Having financial management skills is a step in the right direction. The tips above are a guide on how to utilize your finances appropriately. To achieve a healthy financial life, it is a learning process. Make smart decisions when it comes to your finances and build a secured future.