Starting a new career comes with many new and exciting changes...including a change in salary! When you see the salary that you will be making (and especially when you see your first paycheck) you are going to want to buy all the things! Although you should enjoy the hard-earned fruits of your labor, there are some considerations to think about in advance to maximize your benefits *cough tax free money cough* and ensure financial success for your future.
If you choose to not invest or take advantage of benefits in the beginning, it can be more difficult to invest later after getting used to a higher paycheck. If you sign up to invest in benefits before receiving your first paycheck, you won’t even notice the money that isn’t showing up in your paycheck..
You may not care about investing now, but setting the stage for financial wellness can greatly reduce your financial stress in the future and maybe even lower the age at which you retire.. Thinking about these following tips now will set the stage for financial success.
Take Advantage of Benefits
Invest! If your employer offers benefits...take it!
Retirement Accounts: Most employers offer a monetary match up to a certain percentage based on the amount of money invested by the employee. It’s recommended to put at least the minimum amount of money into your retirement account that they will match. If your employer offers a 4% match, invest at least 4% into your retirement each paycheck. This is tax free money that gets invested to offer compounding returns over time. This extra money can be impactful later in life.
Health Savings Account (HSA): An HSA is a pre-tax savings account that allows users to spend the money on qualified healthcare expenses such as co-pays at doctors’ offices, paying deductibles, prescription medications, and more. Invest the maximum yearly amount in your HSA. After looking at the list of qualified expenses, you will recognize expenses you will be spending money on, so you may as well take advantage of the pre-tax option. Even if you do not spend all of the money this year, it can roll over so that you can spend it any time in the future.
Pay these off as soon as possible! Most financial experts will advise you to prioritize paying off student loans if possible. Before you start investing your money into more advanced investment opportunities (such as a Roth account, IRA, etc.), pay off your student loans. Most student loans have high interest rates and are not dischargeable if filing for bankruptcy. Financial advisors typically recommend paying off any debt that has an interest rate greater than 6% as fast as possible. If you have multiple different loans with high interest rates, it may be beneficial to look into a service that can consolidate all of your loans into one loan with a lower interest rate. Make sure you look into Student Loan Forgiveness programs also to see if you qualify.
Although it may be very tempting to buy and do all the things, try to keep it reeled back a little bit if you can. Buying that new car, moving into a fancy apartment, and taking extravagant trips is so tempting, but be cautious with spending your money. A new job that comes with a high paycheck can be tempting to spend on upgrading your lifestyle instead of making sound financial decisions like paying down student loans and investing in retirement accounts. Starting to invest early and making small financial decisions over time will be the key to a successful financial future.
As for your living situation, renting a newly developed apartment next to your workplace seems like a dream, but consider other options. If you are young and currently live at home, try to live at home a little longer while you work on paying off your student loans. Other options include roommates, or apartments that may be a little older, but still a quality option (you can still make them nice and cozy!).
Your Older Self Will Thank You
When entering the professional workforce, all of the initial options for benefits, insurance, and paperwork can be stressful and intimidating. Educating yourself on all of these options now will help you feel comfortable with the decisions that you are making and ensure that you are maximizing your potential. Speak with your co-workers, managers, and human resources department to gain a better understanding of what benefit options are available to you and how to take advantage of them. While keeping in mind your financial wellness, don’t forget to enjoy some of the money that you are making now...you earned it!
Sara L Piercy, DNP, FNP-C
Sara is a nurse practitioner in a hospital setting in rural North Carolina. She enjoys taking care of the geriatric population and has a particular interest in cardiac and neuro patients.