You have a new job. Maybe it’s your first real job after graduation. Perhaps it is a significant step from your old job. Perhaps you have just returned to work after a break. Whatever it is, you passed the interview and signed it on the dotted line and now you are a new hire.
This is the perfect time to take some wise financial steps. Why? For one, this new job will likely mean an increase in income over your previous situation, which means that some of that extra income will be used for your financial health. Second, the first week or two at work gives you plenty of opportunities to set these things up, as many workstations have meetings and other ways to get this done.
Here are some important things that you should be doing once you start your new job.
Register for your company pension scheme
If your employer offers a company pension plan, see if it matches your contributions in any way. If so, sign up immediately with a healthy post. The contribution should be at least enough to receive every penny of the contribution that your employer offers.
The benefit of doing this right away is that it doesn’t feel like you’re “cutting” your salary. When you get a few paychecks with no retirement contributions being deducted, then suddenly you start contributing to retirement. This can feel like a wage cut (although instead you are only opting to save that money). If you start contributing right away, it doesn’t feel like a wage cut at all.
What if they don’t offer a retirement plan or don’t match?
Think about whether you can realistically expect to earn a much higher salary later in your career. If you follow your current career path, can you expect to double your income in a decade or two? If so, strongly consider opening a Roth IRA if you are eligible. It takes advantage of your relatively low income tax rate by paying you taxes now on your contributions, then when you take withdrawals later If you are retired and possibly in a much higher tax bracket, you will not have to pay any tax.
If you are unlikely to see any major salary increases over the course of your career, consider a traditional IRA instead.
You can sign up for a Roth IRA or a traditional IRA through an investment firm of your choice. It’s easy and can be done online. You will then fund these accounts directly from your checking account, usually through a regular automatic transfer. Not sure how to start? Our guide to retirement can help by showing you the pros and cons of each account type.
Learn more about health care options
Does your new job offer health insurance? When this happens, you should sign up for some coverage to simply protect yourself from catastrophic injury or illness, or to cover ongoing expenses if you have someone in your family with ongoing medical expenses.
However, if your partner already has health insurance that covers you, you should sit down and compare the policies. Choose the one that is most cost effective for your situation.
What if they don’t offer one?
If your employer doesn’t offer a health insurance plan and you don’t have a partner with a plan that covers you, you should seriously consider the options available on the health exchange in your state and sign up for a plan yourself. Again, the main reason is to protect you and your family from the cost of catastrophic injury or illness. With a new job, you can likely afford basic insurance.
Stabilize your financial situation
If your income is experiencing a big boost, this is it Perfect Take a moment to stabilize your financial situation. You live on a large part of your takeaway income day in and day out, say 70%, and then use the other part (in this case 30%) to put your financial house in order. If your income increases significantly, then living on 60% or 70% of your takeaway salary is likely to make a small change in your daily life at first, but you will quickly find that your finances are stabilizing which will have a major impact on help with financial stress . Here is what to do.
Create a debt settlement plan
If you have accumulated debt while attending school, unemployment, or a lower-income job, an important financial goal should be to eliminate that high-interest debt. Your first step is to create a debt settlement plan, which is essentially just a list of your interest-rate debts, with the highest listed at the top. Make minimum payments on all debts, and then make one large additional payment each month for the debts that are top of the list until all of you are left with low-interest debt.
A new job is the perfect time to start reducing your debt as you are likely to see a huge drop in income. Don’t just spend this income on fun things! Use it to clear the table for healthier financial life in the future.
Start an automatic emergency fund
An emergency fund is a pool of cash that is reserved for emergencies so that you don’t run into high-yield debt to cover. In addition, cash handles many situations that credit cards have to contend with, such as identity theft and natural disasters.
Building an emergency fund is a challenge when you don’t have a healthy and stable income, but it’s easy now that you have a new job off to the table. Just open a savings account and set up an automatic small weekly transfer. Then forget about them until you have an emergency.
What should you prioritize?
With all of these options, what should you prioritize? Start assigning your increase as payment for solving your financial difficulties so that you can continue to live on your previous income level. If you need more than that, do this, but you should start from day one by setting aside a good portion of your income for long-term financial stability.
Essentially, you want to prioritize things based on return on money. Make sure you have health insurance as the financial disadvantage of serious injury or illness is catastrophic. After that, it is your best return if the employer is matched to your retirement savings. It then pays off high-yield debt and then builds an emergency fund so you don’t run into high-yield debt again. After that, you should focus on saving for retirement without Matching, up to 15% of your take-home salary and keeping your emergency fund in good condition.
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