How to Manage Your First Salary and Grow Your Savings
Congratulations! Receiving your first salary is very exciting, but if you’re not sure how to manage it, your financials can become overwhelming. One of the first things to consider is your cost of living and the requirements to keep your current lifestyle. This will allow you to grow your savings.
Watch Your Expenses
Once you have decided how much money you’ll need each month for your required expenses—things like groceries, housing, and other necessities—it’s a good idea to create a hard budget for yourself.
A hard budget is one that uses real numbers, like your monthly gross salary and the costs of your required expenses. Base the budget on actual costs to understand how much money you’ll have left for the ‘wants’ in your life.
Being able to minimize unnecessary expenses and spend as little as you can in the first few months with your new salary will help you put your needs first while saving some money for your wants and allowing you to grow your savings.
Take Advantage of Company’s Retirement Plan Offerings
Be sure to look into the 401(k) options your company offers. These retirement accounts are a great way to begin saving for your future with little effort. Find out what percentage match your company offers and put in the maximum amount you can afford. If you can become accustomed to living on a little less each month and adding more to your 401(k) savings, then you’ll be in even better shape when the time comes to retire.
It is often more difficult to backtrack and increase your 401(k) contribution later in your career after you’ve gotten used to having more spending money each month. It’s a good idea to take full advantage of your company’s 401(k) matching programs, so you don’t leave any free money on the table.
Check in on Your Goals Regularly
Setting savings goals for yourself is an easy way to ensure you have something to fall back on in case you need it. Start by looking at your hard budget to see what a feasible savings goal could look like.
By setting reasonable goals for yourself, you’ll feel more accomplished when you meet them. Make sure all savings goals have a timeline, a cash amount, and an end date. Smaller goals overtime can transform into larger ones as you begin meeting goals more often.
Add your existing debt into your hard budget. Organize each item by highest to lowest interest rate, and include each minimum payment amount. Begin paying down those debts with higher interest rates first; the faster you can pay off loans with high rates, the less money you’ll owe in the long run.
Being able to see your debt in black and white can help to alleviate stress. While principal balances can be overwhelming, it’s often easier to digest a schedule of your minimum payments.
Build Emergency Fund
When it comes to emergencies, cash is king. It’s important to have some readily accessible funds set aside for unexpected expenses. Start by saving $500 in a basic savings account. Begin adding to it each month so you’ll have money to dip into when unforeseen situations occur—such as car repairs or pet surgeries.
Emergency funds help us prepare for events outside our control. Having funds set aside for emergencies means you won’t be forced to put unexpected expenses on a credit card or take out a loan or line of credit. Learning how to grow your savings is key to financial freedom.
Open a Health Savings Account
Health Savings Accounts are tax-free accounts offered through many company health insurance plans. Be sure to understand what is offered and how you can take advantage of it yourself.
The best time to begin saving money in an HSA is when you’re young and won’t have many medical expenses. Allowing the balance to build up over time will help you in the future when medical expenses are more frequent. With the costs of healthcare rising each year, every dollar helps, so be sure to explore these accounts if they are offered.