After months spent scouring career boards and hours of networking, interviewing and submitting applications, landing your first job is a major reliefâand a big accomplishment. It also brings new responsibilities as you learn how to manage your first salary, budget for your lifestyle and develop the smart savings habits that will serve you your entire life.
As you prepare for your first day, itâs critical to start thinking about how much of your paycheck you should save.
To help you find the answer, financial experts provide tips on how to manage your first salary, offer strategies to help you save money at your first job and explain how to adjust your savings as your career flourishes.
Save money at your first job: The case for starting now
You may feel intimidated by the commitment to save money at your first job, especially if youâre carrying student debt or feeling like you arenât making quite enough. Joy Liu, head trainer at personal finance company Financial Gym, certainly felt that way.
âWhen I got my first job, I made $35,000 a year,â Liu says. âIt was easy to just throw my hands up and say, âI can’t save right now on this salary.ââ But she urges young savers to reconsider.
âLooking back, with the knowledge that I have now, I could have made it work if I knew that saving was something I needed to do,â she says.
In fact, saving money at your first job will put you in a better place when youâre a seasoned professional, Liu says. When you deposit some of your paycheck into a savings account, youâll earn interest on the balance. Your now larger balance will itself earn interest (youâve got compound interest to thank for that). The earlier in your career you start to save, the more time youâll have for your money to grow exponentially.
Saving money at your first job might also make sense because you likely arenât juggling the large financial commitments youâll face later in life.
âYou may have student loans, you may have some credit card debt, but you most likely donât have a mortgage, which is a huge lifelong commitment,â says Ashley Dixon, a CFPÂ® and lead planner at financial planning firm Gen Y Planning.
Determine how much of your paycheck you should save
You now know you need to sock away part of your earnings from your new job, but how much of your paycheck should you save?
While your specific savings rate will depend on your goals and circumstances, Dixon recommends saving 20 percent of your monthly take-home pay. If thatâs too challenging, start with 10 percent, Liu says.
If you donât think you have enough to save, review your essential expenses, like rent, student loan payments, utilities and groceries. Save from whatever cash is âleft overâ each month, and see how close you can get to that 10 to 20 percent goal.
When determining how much of your paycheck you should save, you might initially find that there isnât enough cash left over. If thatâs the case, create a budget to keep your spending and savings on track, or review your existing budget to see which unnecessary expenses you can cut.
âBeing mindful of where youâre spending your money and keeping track of spending in real time is the hardest part and is where people struggle the most,â Liu says. âBut knowing where your money is at any given point is how you stay on track, whether thatâs creating a spreadsheet or using a budgeting app.â
If youâre not able to hit these savings benchmarks right away, donât sweat it. The key is to save what you can, and you can gradually work to increase your savings over time.
Define your savings goals to gain momentum
To help you get in a groove saving money at your first job, define exactly what youâre saving for. Need some ideas?
When learning how to manage your first salary, Liu recommends prioritizing an emergency fund. A top reason you need an emergency fund is the stability and peace of mind that this stockpile can offer, Dixon says. Should you face an unexpected expense like a costly car repair or lose your job in the future, youâll then have a backup fund to dip into.
âIf youâre young and single, you should try to strive to save six months of living expenses in your emergency fund as a guideline, but that can be different for every individual depending on where they live and family situations,â Dixon says.
Consider your emergency fund one of multiple savings accounts, or buckets. âYou want to have all of these different buckets of money set aside for different goals, and move and prioritize how much money you save for each goal based on their priority level to you and what is realistic within your budget,â Liu says.
In addition to your emergency fund bucket for lifeâs surprises, you can also save money at your first job and contribute to other funds that align with your financial goals, like a car fund to help you buy new wheels or a vacation fund to save up for a getaway.
However you define your goals, the important thing is that theyâre clear to you and that youâre actively saving money at your first job. This positive momentum can guide smart savings habits even once your first day of work is a distant memory.
Use automation to make saving a habit
Even with the best savings goals and intentions, it can be easy to get tripped up. Enter automation. By automating your savings, you reduce your chances of overspending or skipping savings altogether.
There are a couple ways you can use automation to help manage your first salary. You could set up a weekly or a monthly automatic transfer from your checking account to your savings account, Liu suggests. Or, you could ask if your companyâs payroll department allows you to split your direct deposit, sending some of each paycheck into your checking account and some into savings.
Another consideration when learning how to manage your first salary is where youâll keep your hard-earned funds. Many people opt to open a savings account from the same bank where they have their checking account, but Dixon says thatâs not always the best approach.
âYou want to look for a high-yield savings account,â she says.
You earned it. Now earn more withÂ it.
Online savings with no minimum balance.
Discover Bank, Member FDIC
By keeping your money in a high-yield savings account, it will earn a higher-than-average interest rate. Remember compound interest? The higher your interest rate, the more your money will be able to grow over time.
As you do your research to find the right savings account for saving money at your first job, Dixon recommends comparing interest rates from different banks.
âTypically, online banks offer higher interest rates than traditional brick-and-mortar banks,â Dixon says. âMost online banks donât have an actual storefront for you to visit so theyâre saving overhead costs and are able to pass that interest down to the customer.â
In addition to contributing to your savings account, enroll in your employer-sponsored 401(k) plan and take advantage of employer matches if theyâre offered.
In addition to interest rates, pay attention to fees and required minimum balances, says Liu. Fees can eat away at interest earnings, and you may not want to worry about keeping a minimum balance when youâve just landed your first job and are gradually ramping up your savings.
Lastly, consider your access to your funds. âBecause your savings account is separate from your checking account, consider how long it may take to get your funds,â Dixon says.
If youâre looking for a high-yield savings account, the Discover Online Savings Account has no minimum balance requirement and no fees1, so you can turn your savings from your first job into something meaningfulâwithout any hassle or stress.
Keep retirement in mind
As you manage your first salary, saving for emergencies and other short- and medium-term goals is essential. But you also want to start saving for retirement, even if that seems like ages away. Thanks again to compound interest, time is on your side, Dixon says.
âWhen youâre in your 20s, you donât see the large effect compound interest will have because you are just starting your savings; all you see is the money sitting there,â she says. âBut when you get to your 60s, that accountâs going to glow because itâs been growing over time.â
In addition to contributing to your savings account, enroll in your employer-sponsored 401(k) plan and take advantage of employer matches if theyâre offered, Liu says. Your 401(k) contributions automatically come out of your paycheck, so you wonât even have time to miss the funds.
How much you save for retirement depends on your goals and age, but when it comes to benchmarks for 401(k) contributions, many personal finance experts recommend saving 10 to 15 percent of your income, according to the Financial Gym. That said, be careful to not overfill your retirement âbucketâ and run the risk of locking away money you may need in the short term for your emergency fund or other priorities.
Adjust your savings strategy as your career flourishes
As you advance in your career, youâll likely see an uptick in your take-home pay. After a bonus, promotion or new job, your first inclination may be to spend more because youâre earning more.
âYou donât want to create a lifestyle that you canât keep up or maintain,â Dixon says.
While you deserve to celebrate your career wins, determine how you can maintain (or even accelerate) your savings progress as you increase your earning potential.
If youâre earning more and youâre maintaining a manageable cost of living, Dixon recommends putting extra income toward your 401(k) or another savings goalâlike going from renter to homeownerârather than spending.
If you keep these tips on how to save money at your first jobâand beyondâin mind, youâll gain financial security and be prepared to hit all or your financial goals.
Now that you know how to manage your first salary, learn how to negotiate your next one. Here are four tips to successfully negotiate your salary as your career grows.
Articles may contain information from third-parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third-party or information.
1 Outgoing wire transfers are subject to a service charge.
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To make sure they were financially on the mark, Hynd, a marketing executive for HR software company Youmanage, decided to do some research on how to afford a dog on a budget, shortly after Chewie settled in. He was glad he did: He found that the costs of dog ownership added up to much more than he originally anticipated. Fortunately, there was still time for him to adjust.
But Hynd’s foresight is not always top of mind for new dog owners. Getting a dog can be an emotional, knee-jerk decision, and you may not think about the expenses that go along with it or how to budget for a dog. The cost of owning a dog over the average lifespan of 12 years ranges from $5,000 to $20,000. The majority of dog owners underestimate this figure.1 That’s the kind of misunderstanding that can leave you short on funds for things such as vaccinations and preventative careâeven food and toys.
So when asking yourself the question, “How much money should I budget for a dog?” you’ll be glad to know that a little financial preparation can go a long way toward making sure you’re ready for the responsibilities that come with pet ownership. The information that follows can help you and your new pooch share a happy, healthy friendship for years to come.
Welcome home: First-year costs for your pup
“Before getting my dog, I made sure to save as much money as possible,” says Danielle MÃ¼hlenberg, a professional dog trainer and blogger at PawLeaks, a site that focuses on dog training and dog behavior. MÃ¼hlenberg paid $1,300 for her 115-pound rottweiler Amalia. A safe approach when thinking about how to budget for a dog is to “always put away more money than you’ve calculated in your budget, so you won’t be overwhelmed by any surprise costs,” she adds.
MÃ¼hlenberg outlines the first-year expenses new dog owners should expect as they resolve how to afford a dog on a budget and some suggestions on managing costs:
Purchase/adoption fees and dog license
The purchase of a purebred puppy from a breeder can cost anywhere from $800 to $1,500 or moreâwhich makes a pure-blooded hound the most expensive type of dog to own. At the other end of the spectrum are the many shelter or rescue dogs in need of a home; they can generally be adopted for as little as a few hundred dollars. You will also need a dog license to bring home your pup, which runs from $10 to $20 on average (and needs to be renewed annually).
Pro Tip: Once you bring your tail-wagger home from the shelter or breeder, research local vets. Offices in one neighborhood or town can be much pricier than what you’d find if you’re open to a commute.
Upfront medical costs
It can cost between $200 and $800 to spay or neuter a dog at a veterinary clinic. You can typically pay less at a shelter or humane society, where such procedures are often subsidized by donations. In other costs, puppies need an initial exam and special vaccinations that typically run between $75 and $100 (rabies is the only shot required by law, however). Microchipping, while not mandatory, is recommended to help identify your pet if it’s lost or stolen. This procedure costs around $40.
Pro Tip: Plan to have your dog spayed or neutered. Otherwise, you may pay higher boarding fees and license fees, as well as release fees if your pup is taken in by animal control.
Comfort, training and grooming supplies
Expect to spend another few hundred dollars for a collar and leash ($6 to $50), food bowls ($10 to $50), waste bags ($6 to $20), a crate and bed ($25 to $250), doggie shampoo and brushes ($5 to $10), training pads ($16 to $35), toys ($10 to $200) and the first month’s supply of food ($40 to $60).
Pro Tip: Supplies like a dog crate or bowl can be found secondhand for a lower cost, sometimes for free. Check online listings for yard sales and giveaway events, where used or unwanted items are given away instead of being sold or thrown away.
Lost time at work
A new puppy needs a lot of attention, which can add to the cost of owning a dog. One in five dog owners took time off from work to care for a new puppy.2 Some puppies have a harder time on their own and can chew up your home and belongings, so it’s worth knowing this upfront in case your pup needs a sitter.
Pro Tip: Prepare for “puppydom” ahead of time by banking extra personal days or asking about short-term, work-from-home opportunities.
Ongoing expenses for your furry companion
Annual, ongoing costs of owning a dog can vary widely depending on your situation. Why the disparity? It’s due mainly to dog size. For instance, larger dogs eat more food, and if you’re the type of owner that chooses premium kibble over a lower-cost option, that can really add up. Groomers also charge more for larger dogs because of the extra time and care needed to handle them.
MÃ¼hlenberg spends about $1,200 per year on her Rottweiler’s high-end food and another $600 annually for twice-weekly social training sessions. A pricey diet and puppy play camp may fall in the “nice to have” category of dog ownership for some. Dog owners worried about how to afford a dog on a budget can minimize these costs by choosing less expensive canned food and kibble or by making their own dog food. To save on other expenses, MÃ¼ehlenberg grooms her dog at home, makes her own toys and treats and buys pet supplies in bulk.
To help relieve the financial burden of how to afford a dog on a budget, you may want to open a savings account for emergencies. MÃ¼hlenberg puts a few hundred dollars aside each month, which can be tapped for unplanned household repairs due to any damage the dog may cause, dog sitting for unexpected travel or illness or other pup-related surprises. The Discover Online Savings Account is one place to hold cash for a dog-only emergency fund and grow your savings.
You earned it. Now earn more withÂ it.
Online savings with no minimum balance.
Discover Bank, Member FDIC
Invest in keeping your pooch healthy
As you can see, there are a lot of annual costs to consider when determining how to afford a dog on a budgetâand they can really add up, particularly when a pooch gets sick or is involved in an accident. Preventative care such as flea, tick and heartworm medication, which can cost a total of $64 to $320 monthly, and regular vet visits can decrease the risk of an expensive health condition.3
For larger or recurring costs, consider pet insurance (an annual policy costs about $360 to $600).2 Some unexpected expenses can be offset by a pet insurance policy, which “is kind of like a forced savings account,” says Sara Ochoa, DVM, veterinary consultant for product review site DogLab. “You pay the insurance company, and they will pay for most of your pet’s medical bills.” This might go a long way in resolving how to budget for a dog.
For example, a typical pet insurance policy may cover accidents, illness and conditions that are genetic, congenital and chronic, as long as these conditions were not present at the time the policy was purchased.5
âAlways put away more money than you’ve calculated in your budget, so you won’t be overwhelmed by any surprise costs.”
Ochoa is often able to witness the financial benefits of pet insurance firsthand. She cites one example of a client whose dog had emergency surgery and spent a few nights in the hospital. According to Ochoa, the bill would have cost the owner around $7,000. With their pet insurance, they paid somewhere around $1,000.
Create a happy home for your four-legged friend
In the end, how to budget for a dog just takes some advance planning and preparation, which can help manage the upfront costs and monthly cash cushion required to ensure a happy and healthy dog. By understanding the cost of owning a dog as much as possible, you’ll have less financial stress and more time to focus on play time with your pup.
“Even with the associated costs,” Hynd says, “I don’t for one moment regret our decision [to bring Chewie home].” MÃ¼hlenberg agrees: “Bringing a dog into my life has always been a goal and dream of mine. The love and affection you receive back from a dog are priceless.”
1“The True Cost of Owning a Dog or Cat,” Credit.com 2“The True Cost of Getting a Puppy in 2019,” Rover.com 3“The True Cost of Getting a Dog,” Rover.com 4“5 Reasons to Get Your Dog Licensed,” Cesar’s Way 5“Pet Insurance Coverage: What You Need to Know,” ConsumersAdvocate.org
The post Fido-Proofing Your Budget: Managing the High Cost of Owning a Dog appeared first on Discover Bank – Banking Topics Blog.
Prepping for a new baby’s arrival might kick your nesting instinct into high gear, as you make sure everything is just right before the big day. One thing to add to your new-baby to-do list is figuring out how to financially prepare for maternity leave if you’ll be taking time away from work.
Lauren Mochizuki, a nurse and budgeting expert at personal finance blog Casa Mochi, took time off from work for the births of both her children. Because she had only partial paid leave each time, she says a budget was critical in making sure money wasn’t a source of stress.
“The purpose of budgeting for maternity leave is to have enough money saved to replace your income for your desired leave time,” Mochizuki says.
But the question “How do I budget for maternity leave?” is a big one. One thing’s for sureâthe answer will be different for everyone, since not everyone’s leave or financial situation is the same. What matters most is taking action early to get a grip on your finances while there’s still time to plan.
Before you get caught up in the new-baby glow, here’s what you need to do to financially prepare for maternity leave:
1. Estimate how long you’ll need your maternity budget to last
To financially prepare for maternity leave, you need to know how long you plan to be away from work without pay.
The Family and Medical Leave Act (FMLA) allows eligible employees up to 12 weeks of job-protected, unpaid leave from work per year for certain family and medical reasons, including for the birth of a child. Some employers may also offer a period of paid leave for new parents.
When estimating how long you’ll need your maternity budget to last, Mochizuki says to consider how much unpaid leave you plan to take based on your personal needs and budget. For example, you could find you’re not able to take the full period offered by FMLA after reviewing your expenses (more on that below) and how much you have in savings.
Even if your employer does offer paid maternity leave, you may decide to extend your time at home by supplementing your paid leave with unpaid time off, Mochizuki says.
Keep in mind that despite all of your budgeting for maternity leave, your health and the health of your baby may also influence how much unpaid time off you take and how long your maternity leave budget needs to stretch.
As you’re financially preparing for maternity leave, make sure your spouse or partner is also considering what benefits may be available to them through their employer. Together you should know what benefits are available for maternity or paternity leave, either paid or unpaid, and how to apply for them as you jointly navigate the budgeting for maternity leave process. You can then decide how to coordinate the amount of time each of you should take and when that leave should begin.
Contact your HR department to learn about your company’s maternity leave policy, how to apply for leave and whether there are any conditions you need to meet to qualify for leave. Ask if you’re able to leverage sick days, vacation days or short-term disability for paid maternity leave.
2. Babyproof your budget
When budgeting for maternity leave, make sure you review your current monthly budget to assess how budgeting for a new baby fits in.
In Mochizuki’s case, she and her husband added a category to save for maternity leave within their existing budget for household expenses (e.g., mortgage, utilities, groceries).
“We treated it as another emergency fund, meaning we had a goal of how much we wanted to save and we kept working and saving until we reached that goal,” Mochizuki says.
As you financially prepare for maternity leave, consider the following questions:
What new expenses need to be added to your budget? Diapers, for instance, can cost a family around $900 per year, according to the National Diaper Bank Network. You may also be spending money on formula, bottles, wipes, clothes and toys for your new one, all of which can increase your monthly budget. And don’t forget the cost of any new products or items that mom will need along the way. Running the numbers with a first-year baby costs calculator can help you accurately estimate your new expenses and help with financial planning for new parents.
Will any of your current spending be reduced while you’re on leave? As you think about the new expenses you’ll need to add when budgeting for maternity leave, don’t forget the ones you may be able to nix. For example, your budget may dip when it comes to commuting costs if you’re not driving or using public transit to get to work every day. If you have room in your budget for meals out or entertainment expenses, those may naturally be cut if you’re eating at home more often and taking it easy with the little one.
3. Tighten up the budgetâthen tighten some more
Once you’ve evaluated your budget, consider whether you can streamline it further as you financially prepare for maternity leave. This can help ease any loss of income associated with taking time off or counter the new expenses you’ve added to your maternity leave budget.
Becky Beach, founder of Mom Beach, a personal finance blog for moms, says that to make her maternity leave budget workâwhich included three months of unpaid leaveâshe and her husband got serious about reducing unnecessary expenses.
Cut existing costs
As you budget for maternity leave, go through your existing budget by each spending category.
“The best tip is to cut costs on things you don’t need, like subscriptions, movie streaming services, new clothes, eating out, date nights, etc.,” Beach says. “That money should be earmarked for your new baby’s food, clothes and diapers.”
Cutting out those discretionary “wants” is an obvious choice, but look more closely at other ways you could save. For example, could you negotiate a better deal on your car insurance or homeowner’s insurance? Can you better plan and prep for meals to save money on food costs? How about reducing your internet service package or refinancing your debt?
Find ways to earn
Something else to consider as you budget for maternity leave is how you could add income back into your budget if all or part of your leave is unpaid and you want to try and close some of the income gap. For example, before your maternity leave starts, you could turn selling unwanted household items into a side hustle you can do while working full time to bring in some extra cash and declutter before baby arrives.
Reduce new costs
As you save for maternity leave, also think about how you could reduce expenses associated with welcoming a new baby. Rather than buying brand-new furniture or clothing, for example, you could buy those things gently used from consignment shops, friends or relatives and online marketplaces. If someone is planning to throw a baby shower on your behalf, you could create a specific wish list of items you’d prefer to receive as gifts in order to offset costs.
4. Set a savings goal and give every dollar a purpose
When Beach and her husband saved for maternity leave, they set out to save $20,000 prior to their baby’s birth. They cut their spending, used coupons and lived frugally to make it happen.
In Beach’s case, they chose $20,000 since that’s what she would have earned over her three-month maternity leave, had she been working. You might use a similar guideline to choose a savings goal. If you’re receiving paid leave, you may strive to save enough to cover your new expenses.
As you make your plan to save for maternity leave, make sure to account for your loss of income and the new expenses in your maternity leave budget. Don’t forget to factor in any savings you already have set aside and plan to use to help you financially prepare for maternity leave.
Once you’ve come up with your savings target, consider dividing your maternity savings into different buckets, or categories, to help ensure the funds last as long as you need them to. This could also make it harder to overspend in any one category.
For instance, when saving for maternity leave, you may leverage buckets like:
“The purpose of budgeting for maternity leave is to have enough money saved to replace your income for your desired leave time.”
Budgeting for maternity leaveâand beyond
Once maternity leave ends, your budget will evolve again as your income changes and new baby-related expenses are introduced. As you prepare to go back to work, review your budget again and factor in any new costs. For example, in-home childcare or daycare may be something you have to account for, along with ongoing healthcare costs for new-baby checkups.
Then, schedule a regular date going forward to review your budget and expenses as your baby grows. You can do this once at the beginning or end of the month or every payday. Take a look at your income and expenses to see what has increased or decreased and what adjustments, if any, you need to make to keep your budget running smoothly.
Budgeting for maternity leave takes a little time and planning, but it’s well worth the effort. Knowing that your finances are in order lets you relax and enjoy making memoriesâinstead of stressing over money.
The post What You Need to Know About Budgeting for Maternity Leave appeared first on Discover Bank – Banking Topics Blog.