First Paycheck 101: Tips for College Graduates and a Refresher Course for the Rest of Us
According to recent studies by the National Association of Colleges and Employers, employers expect to hire 5.3 percent more new college graduates in 2009-10 than they did in 2008-09, and nearly one in four new graduates who applied for a job will have one waiting for them after graduation.
Unfortunately, the surveys also showed that the overall average salary offer of $48,515 to a bachelor’s degree candidate is 1.7 percent lower than the previous year, which means that even though some graduates will be bringing home the bacon, they probably won’t be living high on the hog.
For graduates who are entering the workforce as well as everyone looking to get or change jobs, here are some tips for managing your paychecks.
Taxing Your Budget
When considering a salary offer, consult some of the online calculators such as the one at paycheckcity.com. After entering the gross salary and details including where you live and the amount of deductions you’ll be taking, you’ll have a good idea of what you will have left over from the paycheck after taxes.
Time Is Money
When creating a spending plan it is not only important to know how much money you are paid but when you receive it. Many bills come in once a month, but paychecks may be given every week, every two weeks, twice a month or once a month. Make a calendar detailing when each one of your bills is due and check it against the date of your paychecks.
Once you have that information, you can set up systems for automatic savings and bill paying. It can be as simple as creating file folders for each pay period to hold the bills earmarked for that paycheck. Nowadays, you can sign up for free online bill pay through your bank which can simplify the process as well.
By viewing your expenses against when your paychecks come in, you always know how much discretionary income you have on payday. It also clarifies exactly where your money is going so that you have the information and understanding to make financial plans and goals.
Where Does the Money Go?
There is no set formula for creating a spending plan since everyone’s goals and interests are different. Some people put a priority of contributions to their houses of worship or the community. Others work to help create more opportunity for their families, go into business for themselves or finance trips to exotic places.
While the list of ways to spend a paycheck is infinite, your salary isn’t. The following general guide reflects the conventional wisdom on how one month’s salary should be divided:
- 35 percent - housing, including mortgage/rent, insurance
- 20 percent - transportation, including car payment, gas, insurance
- 20 percent - other expenses, including food, entertainment, cable TV, phone, internet
- 15 percent - debt, such as student loans, credit cards
- 10 percent - savings
You’ll note the budget suggests 20 cents of each dollar be spent on “other expenses” yet some of those will be fixed costs such as utility, cable and phone bills. Therefore, your discretionary spending will be what is left over. To find more discretionary money, you may need to investigate lowering your cable and phone bills.
The Ends Won’t Meet
What happens if your expenses are more than your paycheck? Every situation is different.
