You've Got Your First Job - Now What?
So you finally got that job offer. Now what? If you had a typical upbringing, you probably didn’t have a chance to learn the basics of money management. Knowing how to navigate a Human Resource benefits website is even less likely.
Nevertheless, having that information can make a significant difference in your bottom line. Of course, you will make some mistakes, but it wouldn’t hurt to have a decent starting point.
When you say yes to a job offer, there are a few boring critical bucket items that will help you get ready to crush it financially.
Start by working on a budget
The first order of business is to figure out how much you’re really going to make, meaning your net income. This can be done by quickly looking at your paycheck and determining what amount is deducted for taxes. Usually, taxes fall in one of the following 3 categories: federal, state or social security.
Side note, if you think you’re getting too much deducted from your paycheck, you can always adjust your allowances accordingly. That way, you can avoid giving a free loan to Uncle Sam.
Once you’ve determined how much money you have coming in, you can actually start planning how to manage it. A good way to set a budget is to allocate your cash flow into 3 main categories: fixed costs (rent, mortgage, insurance…), variable costs (eating out, entertainment, repairs…) and financial goals.
Now that you know approximately how much you’re going to spend every month, you should have a rough idea of the amount you will have left for financial goals.
For example, if your total spending (fixed and variable) is $2500 and you make $3200 after taxes, you have at least $700 available every month to pay off debt, put towards savings or fund an investment account.
Check out your benefits
Many companies, especially larger ones, compensate their employees in many other ways than the base salary. Sometimes, you have to dig deep in the HR benefits website to find out what’s available to you and how to fully take advantage of it. One of the major benefits you are likely to have is a retirement account. According to the American Benefits Council, nearly 80% of Americans have access to employer-sponsored retirement plans. Many of these plans have dollar-for-dollar employer matches, and it’s up to you to contribute enough of your paycheck to receive it. It’s important to check your retirement benefits in order to make sure you don’t leave free money on the table.
Many companies also help their employees with their insurance needs. The most common example is heath insurance, but some may also have group rates for life, or even car insurance.
Nevertheless, you still have to do your due diligence in order to get the best deal. Some programs automatically sign you up to a plan that may or may not be appropriate for your situation. In some cases, it makes more sense to reject your employer’s group benefit and shop independently. As a result, be sure to read through the “Summary Plan Description” language every year.
Last but not least, companies may offer a list of cool perks to their employees. Examples include discounts on wireless phone plans, preferred pricing at some retail stores and free gym memberships. Clearly, there is a lot to look forward to when you sign that offer letter. Some of it may not have been discussed during negotiations. It’s your job to look around and find out what’s out there. If you have questions, don’t hesitate to contact your HR department.
Get long-term disability insurance
This may be hard to think about, but there is a possibility that you will be disabled later in your career. If it happens and you can no longer work, you want to have some income to supplement the social security payments. After all, they only average between $1000 and $1200.
Long-term disability insurance is a great way to have most of your take-home income replaced if you can no longer perform the tasks required by your job due to a disability.
Some companies provide paid short-term disability leave to their employees. Some even furnish long-term offerings. But most likely, it won’t be enough to actually support you in the event of a permanent disability so you may need to shop around to find the right amount of coverage.
Just like life insurance, disability premiums are lower when you’re younger and healthier. As a result, it’s a smart move to get it right away.
Keep in mind that companies differ by industry, size, location and many other factors. There is no one size fits all guidebook on how to navigate through a new job. No matter your situation, doing some research and looking into the aforementioned items can go a long way.
Mr. Compounding is the founder of personal finance blog networthisking.com where he shares his thoughts and experiences on various money topics.