What To Do When You Start Making Money: So, you have finally landed that dream job, and the salary is just what you’ve been needing. Chances are you will spend that first paycheck on a round of drinks to celebrate.
Once you start receiving regular paychecks, the options can feel limitless and overwhelming. While you may be tempted to spend all of that hard-earned cash, there are some crucial steps to take when you start making money.
What To Do When You Start Making Money
Take Stock of your Debt
If you are recently out of college, the chances are that you may still be in what lenders call “a grace period” for your student loans.
The problem with this six-month leeway is that interest begins to compound. The sooner you start making payments on any outstanding debt, may it be student loans or credit cards, the more money you will save in the long run.
Set Up A Budget
Once you have an idea about how much money you are making every month, it is vital to make a budget based on your cash flow. Just because you are making $60,000 a year, does not mean that you are taking home $5,000 a month. Taxes, retirement, or other payments will likely be deducted.
With most online banking tools and apps like Mint, you can easily keep an eye on your expenditures. If you are having trouble setting up a budget, check out some of these helpful tools.
Start a Retirement Account
You may still be in your early twenties, but setting up a retirement account is a great move for someone who is making a steady income. The earlier you start saving in an account, the more you will make from compound interest.
Some companies offer the great benefit of a 401(k), and they will match the contributions that you put into a retirement account. Basically, by taking advantage of this, you are earning free money. If your company does not offer a 401(k), chances are they provide an IRA or Roth IRA. Learn more about retirement plans at thebalance.com.
Establish Financial Goals
If you want to buy a house, have a child, or throw the most extravagant wedding party your friends have ever seen, start turning those dreams into reality. Each month, you can set aside some money so that when your dream comes true, you will be able to afford it. This brings us to our next point, which may be the most important tip in this article.
Save, Save, Save
Saving can be hard, especially in the beginning. There may be so many things you want to do now that you have never had the money for before! Whether you have a savings account, a retirement account, or an investment account, you will want to put aside some of the money that you are making.
We recommend setting up auto-transfer to a savings account so that you never even know that the money is missing.
Figuring out taxes can be difficult, but luckily there are a variety of web apps and resources available to help you navigate. If you are finally making a significant amount of money, say, if you own a business that is recently profiting, you may consider getting a tax lawyer. On the website, Taxlawcanada.com, you can find services to help you deal with audits, income tax planning, and CRA tax collection.
A Final Thought
Treat yourself with that first paycheck; you deserve it! Once your second paycheck comes in, it is time to get down to business, as they say. Set up a budget, start auto-transfers to a savings account, and pay off those pesky student loans. Your future self will thank you.