Congratulations—you’ve scored your first job! But while the exhausting search for a full-time gig is over, the real hard part has just begun: Learning to live off the tiny paychecks you’ll likely earn once you start working. The average entry-level salary for Class of 2016 graduates was projected to be nearly $51,000, but plenty of brand-new employees earn well below that level.
Here are seven simple tips for managing, saving, and spending money when you don’t have that much of it.1. THERE’S A DIFFERENCE BETWEEN YOUR GROSS PAY AND YOUR NET PAY.
Your salary might sound pretty decent on paper—especially when you’ve never had one before—but keep in mind that number you’ve accepted (your gross pay) is higher than the amount you’ll actually take home each month (your net pay). When you get paid, the money isn’t just going to you. Portions of it also go toward federal, state, Social Security, and Medicare taxes. Other deductions include health insurance payments and retirement savings, like a 401(k), if you choose to put money into one. (You should.) If you aren’t sure how much to contribute, there are plenty of online tools that can help, like this one.
When all is said and done, you will likely only be pocketing 60 to 70 percent of your entire salary. Keep this in mind before planning a budget.
2. FINANCIAL EXPERTS RECOMMEND FOLLOWING THE 50/20/30 BUDGET RULE (WITHIN REASON).
Once you receive your first paycheck, resist the urge to splurge. Instead, sit down with a calculator and figure how much of it needs to go toward essential expenses, and how much can be set aside for fun stuff or saved for a rainy day.
Some financial experts recommend following what they call the 50/20/30 rule. That’s when 50 percent of each paycheck goes toward non-negotiable, “fixed” costs like rent, bills, and groceries; 20 percent of it goes toward savings; and 30 percent is spent on things like personal appearance (clothing, haircuts, etc.), travel, and entertainment.
Keep in mind that this rule isn’t hard and fast, and depends largely upon how much it costs to live in your region. For instance, you’ll likely pay way more cost of living expenses if you live in New York City than if you live in, say, suburban Ohio.
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