Starting your first full-time job can be exciting but also means big changes. Here are a few pointers to help you with the financial side of things.
Be Sure To Spend Less Than You Earn
Making sure you spend less than you earn is a great habit to get into. Needless to say, things can get painful quite quickly if you don't.
If you're in your first job, chances are previously, when you were living at home or studying, you were borrowing money or perhaps even going into debt. That's ok. There was no way to 'live within your means' as you didn't have income, but now you do have an income (congratulations!).
So work out what you earn each month, in actual take home pay, after all taxes are paid. Make sure you don't spend any more than that over the course of a month. That includes paying any credit cards you might have off in full too. This is called budgeting and there are many other habits that are helpful here, but the first rule is not spending more than you have.
Become A Regular Saver
Saving is one of the best financial habits to get into. If you're in your first job, chances are all your income is coming from your employer.
However, making investments can provide income too. Income from work is good, but income from investments can be better because the money does the work for you. Now, you do need to be careful with investing since you can lose money in bad markets or with poor choices.
Nonetheless, if you can put money aside that you don't need for several years and spread your saving across different high-quality investments (diversification) then history suggests your investments will rise in value over the longer-term, even if it doesn't happen every year.
Regular Saving - Paying Yourself First
The benefits of regular saving can be impressive. For example, if you saved £100 pounds per month in a portfolio that offered a steady return of 5% each year, then you'd end up after 20 years with just over £40,000.
That's not bad for just putting away £100 each month, but the key is doing it automatically. One way to do this is by making a direct debit from your account. If you have to remember, you may forget to do it, or spend the money on something else. By saving automatically you can establish a good habit without too much work. One way to think about it is 'paying yourself first', since you're putting aside money for your own future before you spend money on other things.
Of course, the markets don't always go up steadily. They can bounce around and you may experience bad months and bad years along the way, but over time investments in diversified portfolios have tended to rise as the global economy expands.
Understand Perks From Your Employer - Pension Matching
Your employer pays you money and that's great. But, if they are a larger company they probably offer other benefits too. An important one to look out for is something called pension matching. A pension is money you are saving for your retirement, and often to help you do this your employer may match some of your pension contributions.
This can be a good way to save. For example, if you put in £100 a month, then your employer may match that. This means that you are then effectively saving £200 each month, but your employer is footing half of the cost, you're still only paying £100. This deal, if your employer offers it, can be worth considering. The downside is that a pension often can't easily be spent before you retire without extra costs and penalties, but pension matching has the potential to grow your savings pot fast.
Check with your employer to see what benefits are on offer and if there is pension matching, consider taking advantage of it. Your pension pot may grow quicker than you expect.
Start Good Habits Early
Starting your first job is an excellent way to establish good habits. First, make sure you are spending less than you earn by keeping tabs on your spending and knowing what you earn each month.
Then consider setting up an automatic way to save each month. It's not necessarily important to put away a large amount of money, but it is important to do it regularly.
Finally, understand what financial perks your employer offers. Many employers offer pension matching, which can be a good way to potentially make your pension pot grow faster. Though with pensions, understand that there are a few strings attached and there may be penalties or restrictions on using the money before you retire.
Getting into good financial habits is worth starting early, since good habits can help you for a lifetime. Maybe getting into good savings habits now means that you'll be able to retire 5 years earlier, or take that dream trip around the world. Those are benefits worth having.