How to Manage Your Finances When You Get Your First Job

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The transition from student to employee comes with many different stages.

When your job offer comes through, you’re so excited that your hard work at school paid off and someone is actually going to pay you to do what you’ve been training for. However, that excitement can turn into stress when you realize how important it is to work hard and prove you’re worthy of the position. Additionally, that stress should motivate you to learn more on the job, so you can eventually move up within your career field.

Excitement, stress, and the motivation to learn are also three of the feelings you’ll experience when you get your first paycheque and need to figure out how to manage your finances. Going from living like a starving student to finally having money in your bank account might be the toughest part of the transition to full-time employment, because you’ve likely been dreaming about all the things you would want to do/buy when you got to this point. But what your new salary is really giving you is a chance to start your new life on the right foot.

Here are our top four tips for how to manage your finances when you get your first job.

1. Add Up Your Debts

If you graduated debt-free, you can skip ahead to #2 – but if you have any debt right now, the first thing you need to do after school is take stock of it. It’s not only important to be aware of the total balance you owe (because hiding from that will only hurt your financial situation in the long run), but to understand how the minimum payments work. For example, your student loans will have a grace period, so you may not have to start making payments until six months after you graduate. That gives you time to get a job, write a budget and map out how your debt repayment will fit into it.

2. Calculate Your Cash Flow and Write a Budget

If you are offered a salaried position, you should be able to calculate your monthly cash flow as soon as you get your first paycheque. If you get paid semi-monthly, just multiply your paycheque x 2, and if you get paid bi-weekly, multiply it by 26 and divide by 12 – that is how much money you can expect to take home each month. Once you know how much money you’ll be bringing in, subtract all your fixed expenses (rent, transportation, minimum debt repayments and savings goals) then see how much is leftover for variable expenses (food, gas, entertainment, etc.).

3. Make Your Savings Automatic

We can’t tell you exactly how much to save each month, as everyone’s goals and budgets are different. The golden rule is to save at least 10% of your gross income, but we’re firm believers that you should try to save more. What you save for is also up to you, but as soon as you start making money, you should consider setting up both an emergency fund as well as saving for retirement – and the sooner you start, the better off you’ll be. The most important part of saving, though, is to make it automatic: that means setting minimum amounts you want to contribute each month or paycheque, and setting up automatic withdrawals from your bank account into your savings/investment account(s).

4. Build Your Credit

Finally, one of the most important tools in your financial wallet will be your credit card. By using one of the best credit cards in Canada to do some of your regular spending, and paying off the balance in full each month, you can not only build your credit (which is powerful when you want to buy a home and get the best mortgage rate) but also earn some great rewards. You could get a travel rewards credit card and use it to earn points that can be redeemed on free flights and hotel stays.

Want more budgeting tips? Be sure to check out RateHub.ca for great resources!

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