Congratulations on the new job! Whether you’ve switched careers, companies or simply just roles within your organization, now is a great time to institute financial best practices when starting a new job. Here’s how.
1. Update (or Create) A Budget
Seems simple, but having a very clear idea of where your money goes each month is the foundation to a robust, and most importantly, realistic budget. I advise you to not change a thing to start. Don’t be on your best spending behavior. You want to be real and honest with yourself. Our past behaviors are a very good indicator that, if left unchecked, will likely repeat.
So go back to your bank account from 6 months ago till now. Take each month and classify or code each of your expenses as essential or discretionary (aka fun!). Installation payments such as credit card debt, student loans, rent etc. are pretty easy to track because they are more or less around the same amount each month. But other line items such as dinning or take out might vary from month to month.
When creating or updating a budget, it’s important to formulate realistic expectations so they are practical and attainable for you to follow. For example, if for the last 6 months you have consistently spent over $100 a month on Starbucks, and you are now budgeting $20 a month, that’s a pretty big jump.
Perhaps you bought a new coffee machine for home use, or maybe you aren’t going into the office with your new job anymore so you aren’t driving by Starbies every day (outta sight, outta mind right?). Either way, dropping from $100 to $20 is going to require some significant change, are you ready to commit to that?
Budgeting is a simple formula of understanding what amount of money comes in and what money goes out. Just because you are making more money in your new job, doesn’t mean you will see that in your bank account at the end of the month if you are spending just as much as you are earning. Remember, more money, more problems.
If you don’t have a plan for your increased salary, it’s far too easy to see your extra income somehow “disappear” each month.
Create or update your budget with data from your last 6 months of spending habits and your new salary. How’s it looking? Does anything need to change? Where can you commit to saving money? Or where can you commit to investing more money?
2. Build Your Safety Net
Right, so you’ve got your budget sorted and you’re riding high on the prospect of starting a new job. Not to be a Debby Downer but for many job seekers, getting to this point was not easy, for some, it was down right torture. I’ve worked with job seekers who took 20, 30 and even up to 40 interviews before finally getting the offer of their dreams. It’s not uncommon, it takes a lot of work to get new jobs, let alone jobs we actually want as job seekers and ones that pay us well.
If you were fortunate enough to be employed during your job search, great! But for many people, this is not the case and as a result, have blown through a decent amount of savings.
A good rule of thumb is to start saving for at least 6-9 months of living expenses as a safety net in the event you get fired, laid off or something happens at work forcing you to leave quickly without another job lined up.
All these scenarios are more common than we like to admit or think about.
Having a safety net puts you in a financially independent position to 1) not have to rely on others and 2) not have to stay at a toxic job. As you are starting your new job with your budget sorted, how much money can you commit to throwing in a savings account each month?
Even starting with $50 a month is something! The key here is to set up your deposits automatically so you don’t think about it and you don’t touch that money. If you start auto deposits alongside your new job, this will trick your brain into not missing the money, because you never saw it in the first place.
It’s a lot easier to save money when you aren’t used to having access to it. So from the start, funnel money from your paycheck to a savings account you don’t use regularly and let it sit. In a year, saving $50 a month will yield you $600, $100 a month and you’ll have $1200, $500 a month and you’ll be in Roth IRA territory… speaking of which…
3. Invest In A Roth IRA
When I first started my career, I contributed 3% of my income to my 403b (or 401k) as that is what my employer contributed so I thought that was a good amount. What I didn’t know was that a) I was in a massive shortfall by only investing 3% (aka I was not going to have enough money to retire) and b) I’d have to work until I was about 60+ years old. NO THANKS. lol
There are a lot of rules and regulations on investing so seek financial advisor guidance before investing, but I’d strongly recommend you look into a Roth IRA. In the United States, Roth IRAs are Individual Retirement Accounts where you contribute money (post-tax) up to $6,000 per year (if under a certain age). The IRS updates the limit each year so Google “Roth IRA max” + the year to see what the max is when reading this article. As of 2022, it’s $6,000 ($7,000 if you're age 50 or older).
Withdrawal rules are different for various types of investments so unless you want to work till your 60+, be sure you are diversifying your investment streams and accessibility to your money at different ages in life. $500 a month is a lot of money for most of us, don’t stress. Start with $50-100 and each year increase it by $10 or $25 to work your way up to the max.
PS- You should also invest/match whatever your employer matches on retirement too. Otherwise, you’re leaving money on the table!
4. Invest In Your Health and Development
While saving and investing money is important (really, really important actually) so is investing in yourself. Consider your health, what expenses do you need to plan for as you start to make more money? Gym memberships, therapy, massages, vacations… these are all things that refill our cup so we can continue to show up to work holistically healthy every day.
Additionally, consider what professional development you want to commit to in your new role (and how much your company will pay). Between additional credentialing, conferences and technology needs, there are a lot of ways to spend money on being a professional, so when you start your new job, discuss professional development funding early and often. Don’t leave any money on the table. If you’re unsure if something is eligible, just ask your manager!
5. Reward Yourself
Listen, I didn’t have money for most of my career. I created my side hustle as a way to compensate for my low salary working in education (hello financial independency!) so I’m not going to sit here and tell you to spend each and last penny to your name on investments, savings and bills. Rewarding yourself is a good thing, it’s a healthy thing. You worked hard to get a new job and make money, celebrate that!
Where it becomes problematic is when you are rewarding yourself a little too much, too often. Set up sinking or miscellaneous funds in your budget. Perhaps it’s as little as $25 a month or cool two, twenty dollar bills if you still use cash. Stash it away and when that Amazon deal comes through on something you’ve had your eye on, you’ve got the funds to cover it in cash, fully, and you don’t need to feel bad about “wasting your money” on things you “don’t need”.
First of all, you are a grown adult, only you can decide what a waste of your money is and secondly, we don’t always have to buy what we need vs. what we want. So long as you budget for it and are in check with your spending, buy that new purse or that new video game! It’s your money!
I hope these 5 practical tips and best practices serve you well as you start your new adventure.
The key to financial success is to keep learning and keep assessing your own situation.
Over or under spending? Update your budget and make adjustments as needed. Got a big expense coming up like a vacation or wedding? Situational budgets come and go so be sure to plan, plan, plan all your expenses into your long-term budgets and goals. Oh yeah, and congrats on the new job, you’re going to smash it!
Related:
New Year, New Job: 5 Ways To Successfully Start Your New Job in 2022
Tips To Professional Growth After College From Two Career Coaches
Find a Job Fast: The Job Search Accelerator For Career Professionals
4 Steps Young Professionals Can Take To Get Hired Right Now
Meet The Writer!
Hi! My name is Nadia Ibrahim-Taney and I help people design happy and fulfilling careers through authentic career coaching. My expertise includes career exploration guidance, resume writing, interview prep and LinkedIn profile optimization. My pronouns are She/ Her/ Hers and as a member of the LGBTQ+ community, I focus on how diverse identities impact and influence folks holistically and professionally. Please connect with me on LinkedIn or at Nadia@beyonddiscoverycoaching.com
