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You just landed your first “real” job and are beginning your career—congrats! Having a career means you’ll be able to work toward a lifelong dream or that you may be able to afford some of those daily comforts. But, before you deposit your first paycheck, let us give you some pointers to help you build a solid financial foundation.
Start With a Budget
Do you remember seeing your parents sitting at the dinner table with a pencil, legal pad and calculator growing up? Or, maybe that’s a scene you would’ve only watched on a sitcom. Either way, tracking the money coming in and going out of your accounts can be nothing short of an awakening. Don’t be caught off guard by a low balance or declined card. Budgeting should be a starting point for all of your purchases, savings and other financial decisions, and you should plan to do it on a monthly or even weekly basis. You’ll first want to make sure you’ve covered your basics like rent, groceries, transportation, utilities (phone bill) and any loans. Next, determine how much is left over for savings—and don’t skip this step! Last, you can see how much is left over for discretionary spending, e.g. things like travel and takeout. Checking out our Budget Calculator to get started.
After a few months of doing this, you’ll have a pretty good idea of what you can spend each month, and from there you can decide what budgeting style works best for you. Some people opt to track their spending closely, down to the dollar and cent, in order to reach their goals. We recommend it, as it’s very easy to accidentally overspend. For a free budgeting and goal-tracking tool, check out our Financial Tracker within digital banking.
Ditch the Debt
It can be tempting to update your car, clothes or phone to match your new “adult” life. We get it! Still, focus on downsizing debt before you accumulate more of it. (One tip to fight off lifestyle inflation: remember that the truly “adult” thing to do is to make wise financial decisions that make future you proud.)
The problem with carrying debt is it inhibits you from having the freedom to pursue your goals. Having the financial agility to pursue your dreams, whether it’s that vacation to Australia or a down payment on a house, comes from having financial margin, and you’ll have more of that when you’ve paid back what you’ve borrowed.
Create an Emergency Fund
Also known as the rainy day fund, this is to cover life’s unexpected expenses. Your car needs a new radiator. You broke your leg, and your insurance requires a heftier co-pay than you had expected. Someone close to you passes away, and you need to travel to their out-of-state funeral. Note that your emergency fund is not a slush fund for vacations.
The purpose of an emergency fund is to provide a backup plan while you’re covering your basic expenses and paying off your debts. Generally, it is recommend to have $500-$1000 set aside. Consider that a minimum. Ideally, you should have 3-6 months’ worth of living expenses set aside, in case of the unexpected loss of a job. If this seems like an extra to you, remember that life happens to everyone. Check out our Savings Calculators to see how you can get started by simply bringing a bagged lunch to work a few times a week.
Put Your Money to Work
Once you’re on a solid financial footing with your monthly expenses and some emergency savings, it’s time to start thinking about how you can grow your money. One of the great things about beginning to invest earlier in your life is compound interest. The earlier you start, the more exponentially your wealth can grow. (And if you need some guidance, TruStone Financial has an investment services team.)
Another prudent way to put your money–and specifically, your paycheck–to work is by participating in your employer’s retirement savings plan if they offer one. Many companies will offer to match the percentage of your paycheck that you contribute to a plan, up to a given percentage. Think of this as a bonus to your paycheck every pay period which is only going to grow in value as time goes on.
We hope that these basic guidelines will help you feel confident as you enter the career phase of your life. Planning for your financial future really is fairly simple: Start following what you’re bringing in and what’s going out. Pay off what you owe as quickly as you can. Make sure you’re prepared for the inevitable and start making your money grow for you. Following these steps can get you marching toward the life you dream of. And remember that TruStone Financial is here to help you reach financial well-being, whatever it looks like for you.
Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.