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15 Personal Finance Tips When Starting Your First “Real” Job


Landing your first career-track job is cause for celebration. Before you start planning for your first day on the job, take an evening or weekend to revel in your accomplishment. You deserve it. What must come next will not be as fun, but it’s crucial to your long-term financial position.

Your first “real” job is probably an entry-level position. If you’ve landed it right out of an undergraduate degree or vocational training program, it may not pay very much in absolute terms. Still, your first paycheck is almost sure to be significantly larger than any you’ve received in the past for part-time or seasonal work. And if your career progresses as it should, you’ll likely earn more in the subsequent years of your working life. That is, unless you decide to take a job you love for less money – which, with careful planning, may not create an undue financial burden.

What will you do with your first “real” job’s bounty? How will you make the most of your (hopefully) steady income? What must you do to increase your financial literacy, set yourself up for financial success while avoiding preventable money mistakes, and ensure that you’re on track to reach your near- and long-term goals? Read on to find out.

Financial Tips to Make the Most of Your First Job

Heed these money management tips and tricks to start your career off on the right foot. This list proceeds in roughly chronological order, beginning with to-dos to address right after you land your job.

1. Open a Bank Account (If You Don’t Already Have One)

If you don’t already have FDIC-insured checking and savings accounts with a U.S.-based bank or credit union, opening them should be your first order of business. Look for free checking accounts that either don’t charge monthly maintenance fees or waive said fees when you set up recurring direct deposits or heed minimum daily balance requirements.

Choose a bank or credit union that fits your needs and lifestyle. Online-only banks like CIT Bank may offer better savings account yields and loan rates than traditional institutions with lots of branches and support staff. If you’re paid by direct deposit (see below) and settle all your bills electronically, you may never need to set foot in a bank branch.

One issue to carefully consider when choosing a bank account is overdraft protection. U.S.-based deposit institutions are generally prohibited from charging fees for ATM and one-time debit overdrafts without affirmative customer consent, resulting in charges being declined. Overdraft fees often exceed $30 per item – an unwelcome bottom-line hit for anyone, but especially for young workers without much financial cushioning. You may decide it’s best to simply decline overdraft protection and accept the temporary inability to make discretionary purchases; hopefully, as your bank balance grows, you’ll encounter fewer overdraft situations.

2. Set Up Direct Deposit

If your employer offers free direct deposit – and most do these days – then set yours up before your official start date. A recurring direct deposit is the easiest way to avoid monthly maintenance fees on entry-level bank accounts that don’t already waive fees, and the convenience is second to none; there’s no need to take your paycheck down to the branch or fiddle with your bank’s mobile check deposit tool.

3. Set Up Recurring Savings Contributions

It’s never too early to start saving. Why not begin with your very first paycheck?

The surest way to save consistently – and maintain a consistent savings rate – is to automate the savings process. You can do this by:

  • Direct Deposit. If your employer allows, send a portion of your paycheck deposit to your savings account every payday.
  • Recurring Bank Transfer. Schedule a recurring checking-to-savings transfer every payday or on the same day each month.
  • Automated Savings App. Use an automated savings app such as Acorns (receive $5 when you sign up) or Digit to periodically draw funds from your checking account and deposit them into your savings account. Apps like Digit use sophisticated algorithms to determine how much you can afford to save each month. If you prefer, you can manually set and change your savings rate too. Some apps – and some banks – have round-up-the-change features that round each debit card purchase up to the nearest dollar and transfer the difference to savings.

There’s no rule against using multiple savings methods, of course. Even if you’re happy with your bank’s recurring savings transfer, I’d recommend using a round-up-the-change app too; the hit to your bottom line will be so small you’ll barely register it, but your savings balance will grow that much faster.

As for your preferred savings rate? That’s up to you. To start, shoot for a savings rate of 10% of your take-home pay – that means savings in an FDIC-insured deposit account, not a tax-advantaged retirement account that penalizes early withdrawals. You might not get to 10% right away, particularly if you need to address high-interest debt first, but it’s a reasonable goal you should eventually be able to achieve with ease.

Ten percent of your take-home pay is a good retirement savings benchmark too, subject to federal contribution limits. See Tips 7 and 8 below for more on retirement savings.

4. Differentiate Between Discretionary & Non-Discretionary Expenses

You don’t necessarily need a household budget to maintain fiscal discipline and spend significantly less than you earn. If you can pay down debt, maintain a consistent savings rate, and avoid lifestyle inflation (more on that below) without a formal budget, more power to you.

On the other hand, financial discipline is nearly impossible without a clear understanding of the difference between discretionary and non-discretionary expenses.

It’s not rocket science. You probably remember that elementary school lesson about the difference between wants and needs. The distinction between discretionary and non-discretionary expenses is no different. Discretionary expenses are those optional expenses that you’d trim or cut in a fiscal crunch; non-discretionary expenses are essential expenses, such as housing and utilities, over which you have limited control.

Formal budget or no, re-evaluate your spending periodically, paying particularly close attention to your discretionary spending habits. If you find that your spending in a discretionary category, such as entertainment, is too high, be prepared to dial it back. Use a money management app such as Tiller that provides easy visibility into spending in specific categories and with specific merchants.

5. Develop a Plan to Address Any High-Interest Debt

Debt Mouse Trap Dice Block Letters

These days, most young people enter the workforce with some debt on their books, and some have managed to accumulate truly mind-boggling obligations. Student loan debt is the elephant in the room, of course, but millions of 20-somethings struggle with high-interest credit card debt too.

You should prioritize paying off such debts over growing your nest egg. That’s because your likely long-term rate of return on savings held in deposit accounts or exchange-traded securities, such as stocks and funds, is far lower than the long-term cost of carrying high-interest debt. Sure, you might earn a return of 4% to 6% in the stock market over the next decade, but you’ll pay 15%, 20%, or even 25% per year to carry that credit card balance. Even after accounting for tax-advantaged accounts’ tax benefits and matching employer contributions – if your employer is generous enough to offer them – paying off high-interest debt first is usually the right call.

How should you go about paying off your debts? Each of these options has its advantages:

  • Debt Avalanche. Make the minimum payments on all your balances except the one with the highest interest rate, and put as much as you can afford each statement cycle toward this balance. Basically, this debt service should replace your savings rate; you’ll put whatever you would have saved toward your credit balance. Once your highest-rate debt is paid off, repeat the process with the next-highest-rate debt.
  • Debt Snowball. Make the minimum payments on all your credit accounts except the one with the smallest balance, which gets the lion’s share of your financial firepower. Once it’s paid off, move on to the account with the next-lowest balance.
  • Debt Snowflake. Make small, frequent payments – as many as you can muster per month, whenever you have extra funds to do so – on top of your required minimum payment or preset installment payment. This method works well for consumers with a small number of sizeable debts; it’s a great use for side hustle income or a passive income stream.

Pro tip: If you’re struggling with high interest debt you could use a personal loan from SoFi to consolidate your balances to a lower interest rate. This can help reduce the amount you are paying in interest. Another option is to use a balance transfer credit card. Most of these cards will offer 0% interest for the first one to two years.

Paying off debts with lower interest rates is less urgent since the long-term carrying cost of such debts is closer to your expected long-term rate of return on investment. Ultimately, your household cash flow and fiscal philosophy will determine how you approach these obligations. If you’re generally averse to debt, you’ll probably want to accelerate your payoff as your cash flow allows.

6. Begin Building an Emergency Fund

Building an emergency fund should be your highest savings priority. A robust emergency fund is sufficient to cover at least three months’ expenses at your current spending levels, but the ideal amount is six months’ expenses.

Even if you’re very frugal, that’s thousands of dollars, so you won’t be able to complete your emergency fund with your first paycheck – nor, in all likelihood, your first 10 paychecks. But don’t let that delay you from starting to build your rainy day fund now. Open a high yield savings account from CIT Bank and start saving today.

Consider plowing your entire 10% savings share – or at least the bulk of it – into this fund. If you earn $4,000 per month, that’s $400. Bolster your emergency savings with periodic or one-time windfalls, such as your annual income tax refund.

7. Set Up Recurring Contributions to Your Employer-Sponsored Retirement Plan (If Available)

If your employer sponsors a tax-advantaged deferred compensation plan, such as a 401(k) or 457(b), join the plan as soon as you’re able to begin making regular contributions. Generally, that’s once you’ve gotten any high-interest debts under control.

Even if you can only contribute, say, 1% of each paycheck, that’s better than nothing. Your contributions come out of your gross (before-tax) income and aren’t subject to federal or state income tax during the year in which you make them – a clear financial benefit over and above your plan’s return on investment. As you’re able, you can adjust your contribution percentage upward, though there may be some red tape associated with such changes.

Another advantage of some employer-sponsored retirement plans is employer matching. If your employer is generous enough to match your contributions up to a certain percentage or dollar limit, your incentive to contribute at least up to that limit is that much greater. It’s definitely worth redirecting funds that you’d likely spend on discretionary purchases – or put into a plain old savings account – toward 401(k) contributions that your employer promises to match.

8. Open & Begin Contributing to an IRA

Whether your employer sponsors a tax-advantaged deferred compensation plan or not, you can always open an individual retirement account (IRA) on your own through a platform like Betterment. Most taxpayers choose one of two IRA options:

  • Traditional IRA. Contributions to traditional IRAs are tax-deductible in the applicable tax year. Withdrawals are taxed as ordinary income. You must begin taking required minimum distributions (withdrawals) at age 70 ½, even if you don’t need the income. Under normal circumstances, you must wait until age 59 ½ to begin making withdrawals not subject to the 10% early withdrawal penalty.
  • Roth IRA. Contributions to Roth IRAs aren’t tax-deductible, but withdrawals generally aren’t subject to income tax. You can make penalty-free withdrawals of contributed funds – but not earnings – before age 59 ½.

The IRS cap on annual IRA contributions applies cumulatively to both account types. In other words, even if you have multiple IRAs, your total IRA contributions can’t exceed the allowable cap in any tax year.

Since contributions to employer-sponsored deferred compensation plans and traditional IRAs are tax-deductible for most employees, there’s no inherent tax advantage to prioritizing one over the other. However, if your employer offers a deferred compensation plan match, you’ll want to max it out before contributing to an IRA.

9. Apply for a Credit Card

If you’ve struggled with high-interest debt in the past, your aversion to opening a new line of credit is entirely understandable. But credit isn’t inherently evil or corrosive. In fact, the process of building or rebuilding credit almost always involves opening one or two modest credit lines, keeping their balances low – under 30% of the spending limits – and paying off those balances in full and on time each statement cycle.

Once you’ve established your credit – or raised your score, if you already had a lengthy credit history – you may choose to use credit cards for most of your everyday purchases, the better to capture cash back or travel rewards. Doing this will increase the number of credit cards you have, and that’s OK, as long as you keep your balances in check and pay off every card in full each month. Consider putting any cash rewards you earn toward paying off long-term debt, such as student loans, or savings.

10. Create Goal- or Category-Based Savings Buckets

Savings Jars Vacation Medical Monetary Goals Coins

For your first few pay periods, it’s more important to set some money aside – anywhere – than to differentiate between specific medium- and long-term goals. Once you’ve gotten in the habit of saving, though, it’s time to specialize.

I’m a big fan of goal- or category-based savings buckets, each with its own separate account. You can avoid monthly maintenance fees by choosing an online bank with free savings accounts. These buckets are distinct from any tax-advantaged savings plans your employer might offer, such as 529 plans, health savings accounts (HSAs), and flexible spending accounts (FSAs).

What you save for is up to you. For example, you might save for:

11. Evaluate Your Housing Needs

Your housing situation at the time you land your first career-track job is probably not the housing situation you want to be in five years down the road. Perhaps you’re living with your parents or sharing a cramped space with multiple roommates; such situations may be tolerable, but they’re not ideal over the long-term.

Once you have some money in the bank and you’re in a position to move without breaking your lease, start thinking about trading up for a better housing situation. Depending on your earnings, existing savings, debts, location, and personal preference, that might mean:

  • Moving into a one- or two-bedroom apartment with a roommate
  • Moving in with a romantic partner if the relationship has progressed to that point
  • Moving into a roommate- and partner-free apartment you can afford
  • Purchasing a starter home

In expensive housing markets, living alone or buying a home may be out of the question for years to come, even if you’re earning an otherwise comfortable living. The median home price in the San Francisco Bay Area, for instance, was $830,000 in early 2019. Assuming a 20% down payment, that means an upfront price tag of $166,000, not including closing costs.

If buying a home or renting a reasonably sized apartment without roommates is important to you, your best bet – disruptive and terrifying as it sounds – may be to move to a more affordable city. Plenty of affordable buyer’s markets have strong, diverse economies with comparable career opportunities, even if starting salaries reflect the lower living costs. For example, Chicago’s thriving tech economy and moderate housing prices – by coastal standards, at least – appeal to Bay Area refugees willing to put up with its long, cold winters; Atlanta holds comparable promise for those happy to endure persistent traffic and oppressive summers.

12. Thoroughly Research Major Purchases

Don’t automatically assume that cheaper is better. If you’re planning a major durable goods purchase – say, a new washing machine or refrigerator – that you hope to last many years, it may make sense to prioritize quality over cost.

You won’t know for sure until you’ve done the research. Get in the habit of using reputable resources such as Consumer Reports (great for evaluating everything from new cars to household appliances) and the Consumer Financial Protection Bureau (great for researching financial products and avoiding potential scams) to investigate products and services before you purchase them. If you need help around the house, use HomeAdvisor or Angie’s List to find and vet contractors and handymen.

13. Consider Hiring a Financial Planner

This isn’t something you need to do in your first week on the job or even during the first quarter. However, once you’ve been earning a “real” paycheck for some time, and you’ve established predictable patterns of spending and saving, it may be time to call in a professional.

A certified financial planner (CFB) can help you make sense of your financial position and identify longer-term plans. For me, hiring a CFB is one of the smartest financial decisions I’ve ever made. It wasn’t cheap, but it was absolutely worth the expense.

Most fee-only financial planners offer project-based planning, a one-off service that doesn’t require an ongoing investment management relationship, which can get pricey. Depending on the planner’s fee structure and the complexity of your financial situation, you can expect to pay anywhere from $500 to more than $2,000 for a planning project. Always get a written estimate up front.

Even after your project is complete, your financial plan is yours to keep and consult. Although we’ve long since addressed its near-term action items, my wife and I still refer to our plan periodically, especially whenever we’re facing momentous financial decisions.

14. Periodically Reward Yourself for Reaching Financial Goals

Without compromising the fiscal discipline that’s made it possible for you to achieve them, periodically reward yourself for meeting or exceeding recurring financial goals and one-off milestones.

An example of a recurring or ongoing goal might be saving 10% of your take-home pay every month. If you’re able to meet that goal every month for three consecutive months, give yourself an affordable reward – a trip to the thrift store, perhaps, or a romantic date night with your partner.

Examples of one-off goals might be completing your emergency fund or making your last student debt payment. Once you make your final deposit or payment, it’s time to reward yourself.

Bigger goals deserve bigger rewards. Buying your first house, for instance, is a huge deal worthy of more celebration than maintaining your savings rate for another quarter. But how and when you choose to reward yourself for meeting financial goals and milestones is ultimately up to you.

15. Avoid Lifestyle Inflation

This is another lifelong goal. Awed by the potential of their first “real” paychecks, far too many young workers succumb to lifestyle inflation, the slow but relentless erosion of fiscal discipline amid rising compensation.

Social context may compound lifestyle inflation. If most of the folks in your social circle have ample disposable income – and spend like it – you may feel real pressure to keep up with the Joneses.

To be clear, avoiding lifestyle inflation doesn’t mean retaining the miserly mindset of your student days. As your income rises, you can and should allow yourself periodic, sensible rewards, as long as you’re still able to say no to frivolous or unwise purchases, get and stay out of debt, meet and increase your savings and investment goals, and spend significantly less than you earn.

Some personal finance gurus advocate making friends with someone who’s been through or narrowly avoided personal bankruptcy. Their thinking: If you’ve never experienced acute financial strain, you don’t truly understand the stakes of sound money management.

Final Word

These personal finance tips for young workers aren’t revolutionary, nor are they particularly new. Your parents may have incorporated most of this advice into their own early career financial plans with little or no modification.

But just like your parents, and their parents before them, you’re on your own personal finance journey. These tips are all sound and sensible, but they’re not all necessarily right for you. There’s no substitute for your own judgment, informed by careful research and the advice of licensed, reputable professionals familiar with the particulars of your financial situation.

Are you about to start your first career-track job? What are you doing to set yourself up for financial success?

Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he's not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.
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