First Job Finances And 5 Things To Know About It

happy male employee holding dollarsIt is always scary for people when they are faced with new things in life and that includes first job finances for the young graduates. You might have experience with some summer jobs or side jobs during college meant to help you pay for school. You might also have had the chance to work in your family’s business in the past. But when you are already on your own with your first job after college, things are a little bit different.

For one thing, you need to understand that this is not just a simple means to an end like your summer job. In the past, you would take up whatever job you can get your hands on to save up for a console game or a comic book. You might even be putting the money aside to help you buy books and pay down interest on some student loans.

But those are mostly short term goals and when you take up a job after graduating from school, this is a start of a long journey and first job finances comes into play. Even before you think about earning extra income or getting chasing your hobby and turning it into a money-generating passion, you need to get your finances straight first.

This should be the sentiment of young graduates especially as CNBC.com shared that there are almost 2 million graduates in 2016 looking for a job. Although the prospects are bright where companies are heard to be hiring more than what they took in last year, it is still about managing the money that comes into play. That first job will be worth nothing if you cannot handle your finances properly like an adult.

Tips on first job finances

If you are all set to report for your first day on the job or you just received an offer, here are a few things you can look at to help you plan your finances. Just like in your freshmen year where you really did not know what you were doing the first few times out, the same can be said when you get your first job. But you need to understand that the stakes are higher so it is better that you get all the help you can get. Here are some of them.

  • Audit your student loans. Student loans is something a lot of people have first hand experience in. There are some older consumers who are still making payments on their own student loans. WSJ.com said that the average debt amount for a 2016 graduating student would be at about $37,000. This is a big amount considering you have yet to get your first paycheck. But you need to face this head on especially now that you have the ability to ship away on it. You need to audit all your student loan accounts to have an idea how much it is and who your lenders are. You can make repayment easy through debt consolidation but you need to closely understand the different options you have with your federal and private student loans.
  • Keep tabs on your credit card. At this point, you might already have a credit card that you have been using since college. In fact, you might have more than one in your possession. As you are now trying to manage your first job finances, you also need to keep an eye out on your card usage. You might still have your old mentality in school where your card serves as your emergency stash that you use in cases where you really need to buy something but you are short on cash. You now need to view your card as a tool to help you manage your finances and improve your score.
  • Check your credit score. When you are starting to take notice the need to manage your finances better, you will come across the importance of your credit score. This is basically how lenders see and view you as a consumer with regards to your financial obligations. The lower your score, the riskier it is to lend to you. And the higher your score is, the easier it would be to be approved for loans in the future like a car or mortgage loan. You can check your score with free tools from the credit reporting bureaus to be on top of those numbers.
  • Prepare your budget as you go along. One of the most crucial building blocks of your first job finances is your budget. The fact that you could be doing this for the first time might intimidate you but you just have to look at the bright side – it is your first time so you can do it as simple as you want. You just have to keep in mind that this will mostly be a trial and error especially in the beginning as you try to get a grip on your expenses. But there is no need for those complex and hard to understand charts or formulas. Just look at the income that will be coming in from your first job and any other sources of funds. You then list down all your expenses you have as well as other funds that you need to build up. Then take a look if you have enough coming in to cover all your financial needs. You can tweak your list until you find one that you are most comfortable working with.
  • Set up your financial accounts. One other thing you need to do is to have your financial accounts in order. Think of it as having different envelopes so you can slowly save up money for various expenses. You can talk to your bank to have an idea what accounts you can open such as a savings account or a checking account or both. You can manage first job finances better when you have specific accounts to use for specific occasions such as paying for utilities or setting aside reserve funds.

Things to avoid when managing your finances

As you move forward and manage your finances with your first job, it is ideal to have an idea on some of the common problems others have had to go through. This can help you prepare and plan your financial steps as you reach for your goals.

  • Getting too many credit cards. Creditcards.com shares that on an average, consumers carry with them about 2 to 3 credit cards. This can be used to separate one for utilities, grocery and gas money. But one of the pitfalls of first job finances is taking in as many credit cards as you can. These can be offers or even card applications which can even lower down your score with multiple hard pulls on your score. But more than the credit score, having too many cards can give you a false sense of security with your finances and you might end up using more than what you can pay off at the end of the month.
  • Not understanding your job offer. You might be too excited that you just scanned through your job offer and signed along the dotted line. You need to put time and effort in understanding your job details and in reading between the lines. You need to be aware of the contents of your offer and not just your salary.
  • Spending more than what you are earning. This can happen when you have too many credit cards or when you do not have any budget list to speak of. You tend to spend more than what you have and put your finances on jeopardy. You need to be mindful of your spending and keep it under control.

First job finances can be intimidating at times because compared to how you manage your money in the past, this is a more serious approach which has long-term repercussions. You just have to start small and build up from there as you go along.