Finding your first job brings a sense of relief and success. Especially after you’ve been looking for a job for months, taking advantage of every networking opportunity, interviewing, and sending out applications. It also brings new responsibilities, as you must now learn to manage your monthly salary by developing good financial habits that will benefit you for the rest of your life.
As with most things in life, once you have a solid foundation, you may build on it indefinitely to leave a lasting legacy. In this case, learning to manage your first salary can help you set the tone for future ones. Here are 8 tips to help you manage your first salary. These tips are also applicable to you if you’re already earning- it’s never too late to improve on your already existing financial habits.
- Create a budget: The first and most important thing you must do is create a budget. This means you must have a strategy for spending your money. You must know how much money you have available and how it will be shared to meet specific needs. In essence, budgeting helps you build effective income management.
Pro-tip: Do it before the credit alert comes in, not after.
- Set financial goals: Setting short, medium, and long-term financial goals is an important step toward financial security. You’re more inclined to spend more than you should if you’re not working toward a defined goal. It’s critical to be aware of your financial objectives while keeping all of your financial goals in mind. Knowing your financial strategy is essential because everyone’s financial goals are different. Financial goals could include a retirement plan, children’s education, marriage, and property buying, to name a few.
- Plan your spending: You have a budget, but you still need to figure out how to spend wisely. Plan your costs, so you don’t go over the amount you’ve set aside for each item. Also, to avoid going broke before the end of the month, try to spend less than you earn.
- Decide to save: Saving money at your first job will put you in a better position when you’re a professional. The sooner you begin saving at work, the more time you will have to watch your money increase dramatically. Calculate how much of your salary should go toward savings. Define what you’re saving towards at your first job to help you get into the habit of saving money. If you don’t think you have enough to save, look at your expenses critically.
- Make saving a habit by automating it: It’s easy to fall short on your savings even with the best plans and intentions. This is where automation comes in. You lower your chances of overspending or falling prey to impulsive spending when you automate your savings.
- Avoid Debt Traps: Getting your first salary as a young man or woman comes with a wish list. You are also likely to succumb to your materialistic desires because they’re difficult to control. A wallet stuffed with many debit cards can easily lead to debt. It’s also essential to distinguish between your needs and wants. There are a few reasons you can find yourself in a debt trap: taking out a loan to satisfy your needs, trying to please people, etc.
- Build emergency funds: The security and peace of mind that an emergency fund can provide are the reasons to have one. You’ll have a backup fund to tap into if you face an unforeseen expense in the future, such as a significant health challenge or losing your job. As a general rule, you should aim to save six months’ worth of your expenses in your emergency fund, although this can vary based on where you reside and your family situation.
- Choose a high-yield savings account: When learning how to manage your first salary, where you keep your hard-earned money is essential. Many people open a savings account with the same bank where they deposit their salary. Look for a high-yield savings account instead. If you put it in a high-yield savings account, your money will earn a higher-than-average interest rate. If your interest rate is higher, your money will be able to grow faster.
Now that you have a better understanding of managing your first salary go ahead and make the best financial decisions for your future self.
