What to Do With Your First Paycheck

Friday’s coming up and that means PAAAAAAAY🔥DAY🔥🔥🔥BAAAAAAYBEEE! (Not that I’ve been counting down since two Fridays back.) 

Earning your own living is a liberating feeling—finally taking care of yourself and calling all the shots with your money, it’s great! But with that added freedom comes responsibility. And history shows that it’s not about how much you make: it’s really about what you do with what you make. (Go ahead and embroider that on a throw pillow. I’ll wait.) 

So here at Kora, we ~ did a thing ~ that is, created a college student guide you through your first big-time paycheck. With these healthy money habits in line, you’ll be ready for a confident, balanced life! And pending that (what is confident and balanced when everything is burning up right now?) you’ll at least have some guideposts for staying a little saner, a little more level when it comes to managing your personal finances. 

Understand Gross versus Net Pay

So many people sign their HR contract thrilled at their new salary (gross pay)—only to find that their first paycheck (net income) is much smaller than they thought it would be. It’s not a bad thing if you know why, though!

Common deductions include:

• State and Federal taxes: be sure your HR isn’t deducting more than you’ll owe in taxes!
• Medicare and Social Security: paying into government funds that will offer you benefits after retirement. 
• Health insurance premiums: your company will often pay for part of your insurance, but you’ll pay the remaining premium. 
• Retirement savings contributions: Take advantage of potential free money through 401k match programs!

It’s natural to feel some pain at the difference between your net and gross pay, but remember, it’s all for things you need.

Know What Life Costs

Next is to be clear on your budget before you start spending. Take time to add up necessary fixed expenses, like rent, and variable costs, like food and clothing. Try free budgeting apps like  Kora and Mint to make budgeting easy and fun!

Financial Freedom from Debt

Student loans, car loans, credit card balances—it adds up fast. So first, make sure you know how much you owe and what your monthly minimum payments are. Then, stay on top of them to keep your credit clean, and pay extra when you can so you can enjoy debt-free living. 

Plan for the Future

We all know time is money—and that shows up when it comes to retirement savings. Money saved just five years earlier can return exponentially more money. So take advantage of company retirement savings plans and tuck away money for a six-month emergency fund.

Enjoy Life Now

Not a contradiction!

Look, all the other points can take the fun out of being an independent adult. SO don’t let them! Studies show that people who try not to spend money on themselves are much more prone to impulse purchases and binge shopping. Be sure to incorporate fun money into your budget and reward yourself for working hard!

At Kora, we’re here to help students be financially ready for college and beyond. We believe that students should be able to manage their finances before they graduate, not years later. Our platform has empowered over 250,000 students with financial literacy, smart savings, and opportunities to build a credit history. 

Stay up to date with your finances by following our blog!

REFERENCES

How to Make the Most of Your First Job Paycheck | The Balance

Three Smart Moves to Make with Your First Paycheck | HBR

First Job? Here’s How to Manage Your Money | The Muse

How to Read Your Paycheck | Investopedia