Getting the Most Mileage Out of your New Paycheck

Congratulations! You survived the strenuous process of finding a job and are a few weeks into your new role; now comes the magic moment of cashing in your first paycheck!  So, what are you going to do with your newfound wealth? How about managing your money so you can successfully pay your bills on time, have a little bit of fun, and save for a rainy day.   

Managing a budget is a snap for some and a headache for others.  Here’s where to begin!    

Now that you’ve seen how much you’ll actually take home, you can update your budget based upon if your pay is bi-weekly, twice per month, or monthly. If you don’t have a budget, click here to learn all of our budgeting tips! 

The sight of your first paycheck may be really exciting or a bit of a letdown based upon your assumptions going in. Your annual salary might seem like a giant pile of cash, but once it’s divided by 24 paychecks and reduced by taxes, insurance premiums, social security contributions, retirement contributions (once you’re eligible to do so), you’re left with a little bit of cash that will have to go a long way until the next paycheck arrives.  

If possible, go for Direct Deposit so there’s no downtime between when the check is cut and the money is ready to use. Your bank should offer this service for free (if not, find a new bank). Get a feel for when your bills come in, and if possible, set as many of them up for AutoPay once you have enough padding in your account to prevent an overdraw. Rent and mortgage payments are typically due on the first, but the rest of your bills will likely arrive as the month progresses, each with a due date (typically 30 days). Be sure to avoid late payments, as these can ding your credit score and also add unnecessary fees to your balance.  

If you’re not bringing in enough income to cover all your expenses, look at ways of downsizing. Living with roommates can often reduce expenses, if you choose the apartment and your roommates wisely. If your two bedroom is too expensive, consider renting a studio for a while. Also, many empty nesters rent out spare bedrooms to offset their own mortgages, so if you can agree to live by their rules, you can sometimes score a really posh landing pad for a really great price.  

If you are making enough to cover all your expenses, be sure to think wisely about what to do with the rest: 

• Saving 

  • For big ticket items down the road like a car, vacation or condo 

  • A rainy day fund should you lose or quit your job without having a new job 

  • Retirement savings – yes, retirement seems like it’s a million years away, but thanks to the miracle of “compounding interest” every dollar you put away now can multiply several times over by the time you retire. Some people even save so well, they retire in their 40’s or 50’s.  

• Splurging 

  • You work hard, so you deserve to have a little fun! Treat yourself to some items that will make you happy without breaking the bank – like a flat screen TV, weekend getaway, or a night on the town. 

• Spending 

  • There are likely going to be some items that you will need in the year ahead that don’t fit nicely into your monthly budget – such as fresh business attire and shoes, a new cell phone, car repairs, gifts, new skis or a guitar, stuff like that. By having some savings to draw upon, you can make these purchases and pay them off quickly. See our tips on managing credit card debt.  

 Welcome to the real world, you’re off to a great start. Remember to be lenient and realistic.  Go easy on yourself – you may overspend a bit here and there, and that’s okay.  Every month, you will get a little bit wiser and a little bit richer.