Receiving your first paycheck feels great. After years of studying, it feels amazing to finally be independent and earning your own money.
The first paycheck is a reward for all of the hard work you put into your new job and the initial job hunt, and it signals the beginning of a new chapter in your life. However, it is important to manage your paychecks wisely, or you may find yourself in a difficult situation.
How you manage your money is a big indicator of how successful you will be. If you pay off your debts and save, you are preparing for a secure and happy future. If you live for the moment and spend without saving, your future is likely to be very stressful.
From opening a 401(k) account to going on an expensive holiday, there are lots of different ways to spend your newfound wealth. Here are four things you should consider doing with your first paycheck.
Get a 401(k) account
A 401(k) may sound incredibly boring, but it exists to benefit you. It is a savings account offered by some companies, and it allows you to put aside money for your retirement. You may be thinking, “My retirement? I don’t need to save for that; it’s so far away!”
However, the cost of retiring is very high, so the sooner you start the better. You may be retired for over 20 years, and that requires a vast sum of money. If you wait until later, you are more likely to have a stressful retirement, as you are not financially secure. Another benefit to saving early is the interest—as your investments have longer to grow, you will end up with even more money.
If you want to start saving for your retirement now, contact your company to see if you can set up a 401(k) account.
Check out the benefits package your company offers
If you get a 401(k) account, you may be able to double your savings by teaming up with your company. Some companies match your payments if you meet a minimum amount, so check with your company to see how much you need to pay to get your company to match your payments.
Not all companies offer this deal and companies that do rarely reach out to their employees to tell them, so it is a good idea to do some research first. If you can, it is certainly worthwhile—who doesn’t want to double their retirement fund?
Set up a health savings account (HSA)
When you start working full time, you realize how expensive taxes are. On the plus side, there are a few ways to make your taxes cheaper, and one of them is a health savings account. This is a separate savings account for your health spending, such as doctor’s trips or prescriptions. The money is taken out of your paycheck, and it is tax-free. This helps to make your taxes cheaper, and it means you don’t have to worry about finding the money for a doctor’s appointment.
A couple of things to note: If you have a high-deductible health plan, HSAs are definitely something to look into; if you don’t have a health plan like this, you’re not eligible. Also, make sure you are in a solid financial state before signing up for an HSA. If you find yourself in strife and need to dip into the account for non-qualified expenses, you may find yourself stung with penalties.
Set a budget for the rest of your money
After you’ve set up a 401(k) account, and an HSA, you need to create a budget for the rest of your money. Plan for rent, bills, and food, and then whatever you have left is just for you. You can use it to go on vacation or for nights out—it’s up to you, as this money is all yours!
While there are so many different ways you can use your first paycheck, most of them very adult and responsible. But because you don’t always have to worry about adulting, another way you can spend your first paycheck is to simply cash it. You’ll never have another first paycheck, so why not have a bit of fun, too?
Disclaimer: Hey! Welcome to our disclaimer. Here’s what you need to know to safely consume this blog post: Any outbound links in this post will take you away from Simple.com, to external sites in the wilds of the internet; neither Simple nor The Bancorp Bank, our partner bank, endorses any linked-to websites; and we didn’t pay/barter with/bribe anyone to appear in this post. And as much as we wish we could control the cost of things, any prices in this article are just estimates. Actual prices are up to retailers, manufacturers, and other people who’ve been granted magical powers over digits and dollar signs.