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A Financial Checklist for Your New Job

Posted on the 08 June 2024 by Smallivy

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Congratulations on getting your first job.   I know that college was a lot of late hours, then the whole job search was exhausting.  You probably thought sometimes that you would never land a job – yet here you are. You’re being introduced to everyone, being issued a laptop, and being shown to your cubical.

Investing to Win

You’re probably interested in finding out things like where the cafeteria is and where you can get office supplies, but there are a few other things that you should add to your checklist from the personal finance realm.  Do these things now and your life will be so much better in the future:

  1.  Start saving and build your cash savings up to $10,000 as quickly as you can.  Having cash in a combination of a savings account, money market, and a set of CDs will make sure that you have the money needed to take care of things like car breakdowns and your portion of medical emergencies.  If you don’t have some cash sitting around, you’ll need to go into debt, which is not a good thing because you’ll be spending money on interest. Put away some cash now and you’ll never get into debt in the first place.
  2. Open a 401k and put enough of your paycheck in to get the full company match.  Retirement may seem like a long way off, but it also requires a lot of money (like millions of dollars).  That seems like a whole lot of money (because it is.) While it’s hard to save up that much money in a few years, if you put money into stocks now you’ll only need to actually save up a small portion.  Money you put away between now and age 45 will make a much bigger difference than money you put away between age 45 and 65.  Plus, if you don’t put enough money into the plan to get the full company match, you’re leaving money on the table. Why not get your full salary?
  3. Open a Roth IRA and start putting in $250 per paycheck.  You’ll have more control over money you put in an IRA than you will in a 401k since the investment options will be almost limitless.  Your 401k investment options are chosen by your company, which may include high fee mutual funds and even worse, company stock.  You’ll want to put away about 15% of your paycheck anyway, so contribute as much as you can (currently $5500 per year) to a Roth IRA.  If you still aren’t saving 15% after you max out contributions to a Roth, increase your 401k contribution.
  4. Get term life insurance.  If you have anyone depending on your paycheck, you’ll need term insurance to provide for them should something happen to you.  For about $500 per year, you can get a half million dollars or more in 15-year fixed term insurance.  That is about how long you’ll need before you’ve saved up enough to just self-insure if you follow the advice in this post.
  5. Pay off your student loans.  Before you go shopping for a new car or a home, get those student loans out of the way.  Just keep living like you are still a student for a couple of years and you’ll probably knock them out of the way.  You can then save for a home without the constant burden of making student loan payments.
  6. Start investing for a good used car.  You probably got a car from your parents to help you out or maybe you’re driving a beater you bought yourself in high school. In a few years you may be looking to trade in for a new car off of the lot. Don’t. For about $5,000 you can get a vehicle that will reliably take you to work and back, or wherever else you want to go, for the next five years.  You may pay $1,000 per year for repairs and maintenance, but that beats paying $4,000 per year or more for depreciation, plus another $500 per year in interest.  One of the best moves you can make is to buy used and then put some of the money you’re saving on payments into investments so that you’ll have the cash you need to replace your car with another used car when the time comes.  If you want to get a little newer, you can also start with an older car and then use the savings you have by not paying car payments to move up in car, getting maybe a one or two year-old model every four or five years, if you wish. Buying a car about four years-old, however, is a sweet spot where you can get a car with a lot of life left but at about half the cost of new.
  7. Save up 20% for a home.  If you put down less than 20% on your home, you’ll end up paying mortgage insurance.  This is extra money you pay out that protects the loan company in the event that you default but does nothing for you.  Plus, putting more down means hundreds of thousands of dollars saved in interest over the life of the loan.  So, do your best to get a 20% down-payment saved before you buy a home. It may take longer to get into a home, but some things are worth the wait.
  8. Get health insurance.  A major cause of bankruptcy is unexpected medical bills.  Be sure to sign up for health insurance for you and your family. Also, put away enough to cover your deductible and a few hundred more to cover your part of the medical payments each year.
  9. Open a mutual fund account and start sending in money regularly.  You’ll want to gain financial freedom, which means that you have enough money invested, generating income, that you won’t need to rely on your job to pay the bills.  The way you get there is to invest regularly.  It will take 15-20 years, but if you put away a couple of hundred dollars per month into stock mutual funds, you’ll get there.

Do you know how to select mutual/index funds to maximize your returns? If you’d like a little guidance, check out Sample Mutual Fund Portfolios . This gives sample portfolios you can use for reaching all sorts of different goals, including retirement.

Your investing questions are wanted. Please leave a comment and let me know what you think.

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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.