How to Start Managing Finances After Landing New Job

If you’re someone who has recently started a new job, whether that’s a job change or entering the workforce for the first time, you’ve got a big question that you need to ask yourself.

What are you doing to manage your money now that you have the job of your dreams or first-time steady stream of income?

This sort of money managing is painting with the proverbial broad brush, simply due to how the demographic can span from the 20-something year old who is hitting the job market for the first time after college or trade school or easily could be describing an individual who has received a promotion at any age, either within the same company they’re current working for or someone who has changed jobs to the tune of a raise.

No matter why this new job has come your way, you should be making and handling your newfound or newly increased income in certain ways that allows you to become more financially stable, rather than simply spending more or, due to having a paycheck, find yourself in a sea of uncertainty.

The penchant and temptation for individuals new to the job market to start spending sprees is certainly obvious, given that this income, to this degree, might not be something they’re accustomed to.

On average, the college graduate makes about $50,000, and that figure spans across a variety of jobs, with engineering being on the high side of that, approximately $64,000 per year with software developer just a few thousand more than that.^[1]

That $50,000 mark might be unchartered territory for the post-scholastic individual who may have worked a minimum wage job though school or didn’t really work much whatsoever.

Your first inclination as a graduate is repaying student loans, but that’s only going to account, on average, for approximately $280 per month, or $25,000 in total debt.^[2]

That $280 pales in comparison to the amount of income you’ll have beyond that single payment back to the lenders who helped fund that education.

What exactly should you be doing with the rest of your income as a newly graduated student entering the workforce?

The flip side are the job changes, promotions or moving from one company to another for assumably an increase in pay.

One of the more glaring mistakes that those individuals make is assuming that the increase in pay is all the more reason to buy a new car, move to a bigger house or just generally upsize what they’re already in the midst of living in at the moment this income influx occurs.

The average pay raise is around 4 to 5 percent, with most hovering in the 3 percent mark.^[3]

Most companies believe in merit increases based on the market rate for a job or how the job stacks up to the organizational chart within the company itself, also considering outside marketplace wages as well.

That 4 to 5 percent typically means a few hundred dollars more in your paycheck, but it’s what you do with after that makes or breaks your financial future and how secure it might be.

Even if you’re only earning a few hundred dollars per month, that money needs to be used with your best interest, money-wise, in mind.

Sadly, only about 22 percent of individuals say they’re planning to use their raises for paying down debt, as just one example of how money potentially could be spent over and above what you’re currently making.^[4]

The rest of that 78 percent could be used for a myriad of other expenses that hardly qualify as smart or prudent, such as a vacation or any of the aforementioned splurges of a car, home or shopping spree of some sort.

If you’ve landed the job you want, the job of your dreams or a job that is exceptional with benefits and pay (or whatever the circumstance is surrounding your increase in pay or new job), follow these simple guidelines to gain more financial acumen and sense of purpose, beyond overspending:

Fund Times: Start an emergency savings fund yesterday

The average person has less than $1,000 in their savings account, to the tune of 69 percent of the United States population.^[5]

That fact is downright scary when you consider the average costs of home or car repairs, medical expenses or any other expense you could run into at a moment’s notice.

The idea of getting a raise in your paycheck should immediately translate into wanting to start or build your emergency fund or savings account further (or just starting one to begin with).

The general rule of saving money and starting a savings account in conjunction with your gross monthly income is about 10 percent into an emergency fund.^[6]

The overall total for savings is 20 percent, with that being split equally between retirement and savings.

A 3 percent raise might not sound like much, but against an income of $50,000 that’s $125 per month against what you should be saving at the 10 percent mark, which would be $400 per month. If you’re struggling to hit that $400 plateau, the additional raise can get you to that level or beyond, rather than using it for something less practical and important.

Tackling Debt, Dummy: Hit any debt you have hard with increased income

Debt is a backbreaker, and as detailed earlier, for those out of college you’re already saddled with nearly $300 in debt per month on student loans.

If you’re in that scenario or are more of a seasoned worker with considerable debt, a raise is a perfect opportunity to start paying it down.

One scenario detailed shows just an additional $80 per month on a $15,000 line of credit as debt, you can have it paid off in two years and save several thousand in interest (approximately $4,000).^[7]

When you look at the statistics, the average debt is just over $119,000 per household, so imagine what a simple $80 might mean to your outlook over a longer period of time?^[8]

A key rule of thumb that often is overlooked when it comes to debt is that you should never spend more than 36 percent of your gross monthly income on debt, as part of the 28-36 rule, which uses the 28 for the max percent to put toward your home.^[9]

That 36 percent should be your goal, and paying down debt is paramount toward increasing and elevating your credit, in addition to being able to take what monthly payments you’re making toward debt and reallocating it to a retirement account or something else that is far more lucrative than paying back money you borrowed from a lender.

Retirement Accountable: This is just plain simple, adding extra cash to retirement

The retirement outlook is bleak, mostly perpetuated by actual reality stemming from a lack of planing, but also a general sentiment from the masses that retirement isn’t going to be a possibility for some, or at least feels that well overall.

Nearly one-third of the population has zero dollars saved for retirement.^[10]

This would be more than enough to take retirement more seriously than most, given that retiring comfortably should go hand in hand with being able to put financial worry and concern in your rear-view mirror.

If you dial in a little deeper, most Americans are worried about how they’ll pay for medical costs (41 percent) after they retire, with other concerns centering on debt (18 percent), and medical prescription expenses (31 percent).^[11]

All of that pretty much sums up the general blasé attitude that has gone hand-in-hand with retirement.

The fact is individuals don’t make it a priority into well beyond the point when panic sets in and the realization that you’re coming up on retirement age and have little to no money saved.

Any additional money you get as part of a new job or raise also should be put toward retirement and saving for a future, post-work that at the very least is feasible if not existing at all.

The general rule of thumb is putting about 15 to 20 percent of your income toward retirement.^[12]

And before those who are starting a new job in their 20s believes wholeheartedly that this doesn’t pertain to you, think again.

The recommended time to start saving for retirement is in your mid-20s, which correlates nicely with getting that first big, good job out of school. That money isn’t meant to spend freely, and if your company offers a 401K program, you should put at least 20 percent toward it, especially given that you’re expenses will most likely at this age be at an all-time low, even with a larger than life school payment.

Consider that expenses grow over time, especially if you’re buying a home, getting married, starting a family and general spending that goes into all of those monumental events.

Retirement planning in your 20s makes it easier, too, to get to that 1 million dollar club. If you save $4,500 over the course of a 45-year career (considering that you start at 20), you’d be able to save 1 million dollars toward retirement, a lofty goal but one that seems more reasonable when you consider that few extra dollars for a raise could lead to bigger, better and greater things as your career winds down.^[13]

The joy of staring a new job shouldn’t be overshadowed by immediately diving into your finances and take the “fun” out of a huge accomplishment.

That said, you can’t take what would be income that you’re unaccustomed to and spend it freely or assume that money you’re making over and above what you made last year is simply “found” and can be treated as wasteful, to be used for items, services and things that really aren’t helping your financial outlook one bit.

A recent survey said that the average person worries more about money than their relationship or work, for that matter.

Roughly 44 percent of the general United States population worries about money, compared to 25 percent on your relationship and 18 percent of that centering on work, a fairly large discrepancy in numbers.^[14]

So if money is such a hardship or point of contention for most, why not manage it properly, particularly when you suddenly have more of it.

Rather than live beyond your means or immediately take what extra you have and allot it toward another bill, you should be thinking more long term, with savings accounts and retirement on the brain or using it to pay down debt or upgrade an asset you have with work being done to raise the value of it (think property).

Anything short of putting it toward that certainly creates a situation 10 or 15 years later where hindsight is 20/20 and also relatively moot.

This isn’t to say you can’t stop, smell the salary roses and enjoy your successes.

But once that moment has passed, you’d be wise to take a whiff of what financial longevity and stability truly smells and feels like.

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