Whether you're about to embark on your first job or are in the early stages of your career, you’re gaining a whole new level of independence–and expenses. It's a critical time to figure out how you should move forward in your financial journey and set yourself up for financial success.
First jobs aren't just ways to pay your bills. They're also an opportunity to learn key life and financial skills—like maximizing your paycheck, budgeting, savings, and how to set and achieve your goals. Start to learn these skills early on and you’ll be well on your way to leveling up your financial game for the rest of your life.
1. Understand your paycheck
As those paychecks start coming in, make sure you have a strong understanding of how your pay breaks down—the “gross pay” you expect to make, your withholdings, and your actual take-home pay. There are differences in tax withholding classifications depending on whether you are a W-2 employee or a 1099 contractor. The key difference is a W-2 employee has taxes withheld by the employer in each paycheck, while a 1099 employee does not have taxes withheld. W-2 employees file a W-4 and independent contractors file a W-9. Therefore independent contractors are responsible for withholding their tax payments on a quarterly or annual basis.
Understanding your federal tax deductions gives you an idea of what your cash flow per month will be and an overview of where you can start to budget your expenses and your financial goals.
2. Set your direct deposit up for success
Over 7 million American households don’t have a bank account. Why? The common reasons listed are fees and not having enough money. Many banks have a minimum balance requirement as well as overdraft fees and transfer fees. It makes sense why many Americans feel overwhelmed and frustrated resulting in avoiding banks altogether. But not all bank accounts and direct deposit options are created equal—there are many (like Branch!) that offer a fee-free banking experience, the convenience of automatic deposits, and easy ways to access your money.
With paper checks, you have to wait for the check to clear—or worse, you have to pay to cash it. One of the perks of a Branch account is being able to access your pay directly from your employer instantly. Your hard-earned cash will be sent directly to your checking account and you'll be able to spend or save your money as needed. So forget about the old ways of waiting for your check to clear. Payments to your Branch Wallet are fast and designed for you to grow financially.
Manage all of your money in one place with direct deposit
Direct deposit is convenient—it offers a safe, easy way to receive your paycheck and easily monitor your spending.
When your employer signs you up with Branch, you get a free checking account and digital wallet. Your Branch Wallet has many bank-like features without the restrictions of traditional banks. Below are some of the Branch benefits:
- No late fees
- No overdraft fees
- No minimum balance requirements
- Free ATM access within the Allpoint Network (more than 55,000 ATMs)
3. Take advantage of employer-sponsored perks
No matter where you work, make sure you're not missing out on employer-sponsored benefits such as earned wage access/Instant Pay, 401(k), and health insurance. These are some of the most valuable perks that your employer could offer. Not only can these benefits help you financially in the short term, but can also continue to serve you throughout your life. Understanding all the benefits that come with your job can help you save on essential costs from medical expenses to cell phone bills. Reach out to your HR representative to learn more about the range of benefits available and what might work best for you.
4. Get down to the basics of budgeting
Start by tracking your spending down to the last cent. Adding this extra layer of discipline to your wallet is a great life-long habit—and starting early will help you stick to your budget for the long-term. Why is setting up a budget like this beneficial? It’ll help you learn to plan ahead and could be a life-saver down the road if you need extra cash for an emergency or something unexpected. The general budgeting rule breaks down your income into two main categories:
- Fixed expenses are categorized as costs that recur every month. These are rent, student loans, insurance, phone, internet, streaming services, utilities, and credit card payments.
- Variable expenses fluctuate monthly—such as groceries, gas, clothing, and entertainment.
Utilize the CashFlow tool built into your Branch Wallet. CashFlow is free and provides spending insights to make budgeting easier, so you can make the most of your paycheck.
Set attainable savings goals and find ways to save
Once you’ve gotten a better understanding of your spending essentials and how they may fluctuate, it’s time to take a further look into your spending to see if there are any opportunities to save. It may be harder, especially with your first job, but even setting aside a few extra dollars a month can help build savings and start an emergency fund.
Now that you’re in tune with your expenses and income, it may be the right time to set short and long-term savings goals that work for you. Financial experts recommend starting to save as early as you are able.
Understanding your paycheck, budgeting, savings, and getting the most out of employer perks are essential building blocks for anyone in their first job. Once you start implementing these tips, you’ll be well on your way to moving forward on your financial journey.
