Landing your first full-time job is an exciting accomplishment. But with it comes responsibility, including handling your paycheck. These suggestions not only can help get milkids get on the right track financially, but they also are great reminders no matter where you are in your career.
Don't bite the hand that fed you. If you participated in ROTC or attended a service academy, you probably don't have much college debt, but if you have credit card debt or need to repay a loan to a family member, it's time to step up. Debts easily can snowball and bury you. Decide on an amount from each paycheck that should go to paying off your debt. And don't just pay the minimum. If you don't believe me, a section on your credit card statement explains how long it will take and how much it will cost you in interest if you only pay the minimum.
Establish a rainy day fund. There's no doubt about it - it will rain, whether it's in the form of a large medical expense copayment or a new radiator. Studies show that most of us can't cover an unexpected $400 expense, so start building a three- to six-month cash reserve, pronto.
Don't forgo insurance. If you're lucky, you'll have some forms of insurance, like health, disability, and life, offered through your employer. If not, don't skimp or delay getting coverage. Research suggests 1 in 3 people will become disabled for at least 90 days, so all wage earners in your home should have both short-term and long-term disability. Buy a term policy not tied to your employer in case you change jobs. If you're renting your home, don't forget renter's insurance.
Save for the golden years. Life expectancy is hovering around 80 these days, so you need to start financially planning today for a long, full life. If anyone in your household has the benefit of a matching 401(k), max it out. This is free money, and an offer you can't refuse. You might think you have all the time in the world to save, but take these words to heart: compound interest. Putting a mere $25 a month in a fund earning 5 percent per annum for 45 years will cost you $13,500 but could earn you around $48,000 before fees.
Don't overspend. The freedom that comes with a regular paycheck is exhilarating, but resist the urge to buy the biggest engagement ring or the latest-model car. Bad spending habits are hard to break, so learn to live within your means from the get-go.