If you are just embarking on a new career and making some real money for the first time, it may be tempting to go out and buy a great new car, some new furniture and a bunch of other luxuries to celebrate the fact that you are now officially employed. However, the smartest thing that you can do once you get a job is to start saving money right away. If you get into a saving plan or program from the start, saving money will be easy and effortless and you will be setting yourself up to be in a great financial position in the future.
Steps to Start Saving Money
If you are newly employed, here are a few key steps to start saving money:
- Keep living like a college student for a little while. There is no reason to run out and buy new expensive things just because you now have a paycheck. Other than some professional clothes for work, the things you had before your new job should still be good enough for now. Use what you have until it breaks or needs to be replaced and in the meantime, save more of your salary so you will be ready to buy what you want and to have greater financial security in the future.
- Define your goals. You should have both long-term and short-term saving goals. For example, you may want to think about starting to save for a down payment on a house. It is easier to save if you know exactly what you are working towards and how much to save for it. This can help you to stay motivated.
- Set up a budget. You should have a detailed budget specifying how much you want to spend on food, housing, transportation, clothing and other necessities. You should also outline how much of your money you want to save and allocate that money towards your different goals. Include all of this in your budget and give every dollar a job (i.e. create a budget plan where your monthly spending and saving is exactly equal to the money you are bringing in).
- Sign up for your 401K. Most employers will offer a 401K match after you’ve been working at the company for a designated period of time. Even if this is not an option, you should still sign up for a 401K since you can invest for your retirement with pre-tax money using this special account. If your employer doesn’t offer a 401K or one isn’t available to you, then you should consider opening an IRA account which has similar tax advantages and which can be opened up at a variety of online brokerage firms as well as at your local bank.
- Make savings automatic. Set up a portion of your paycheck to be deposited right into your 401K or retirement account, and a portion of the paycheck to be deposited into another designated savings account (or even multiple accounts) that you create to help you save for your other goals. If your money is moved into savings automatically, you won’t have to actually make the decision to save each month and the money won’t just get spent.
If you follow these basic steps, saving should be very easy and should become second nature. You’ll never miss the money you are saving because you will never get used to having it, and you will be setting yourself up to be in a great financial position in the future.