Whether it's a $30,000 salary or $130,000, your first "real job" is probably the biggest income change you'll experience. Sure we'll get gradual raises here and there, and maybe even a major promotion or two, but going from an income of nothing to a full-time salary is quite a jump.
As a result, managing your first few paychecks can be difficult. It's easy to overestimate disposable income and end up spending money on things you really can't afford. Rent, food, loan payments and other necessities are obvious items to add to your budget, but there are other essential expenses you might not realize.
Bad things happen to good people. That's just the way life goes, so you need to prepare for the worst. Layoffs, car accidents, unexpected illnesses; whatever the case, you should have between three to six months of living expenses saved to prepare for life's unexpected expenses. It may seem unattainable at first, but saving a little bit at a time will help you reach it. And, once you have three to six months of your living expenses safely stored in your savings account, you'll sleep a little better at night.
401K / Retirement
When you're twenty-three years old it's hard to grasp the concept of retirement. Why should you save for forty years from now if you're already struggling with money today? Shouldn't you get out of debt first, and then start to save?
Although that might make sense to you, it's not making cents for you. Your early 20s are a crucial component to your retirement savings. Saving even a little now can make a big difference later. If you start saving $1,500 a year at 24 in an IRA, you'll have around $340,000 at 65. However, if you wait until you're 34 to start; you'll have about $164,000 -- less than half the money.
Christmas / Vacation Club Account Savings
The holiday season falls at the same time every year, yet somehow people still seem to find themselves drowning in debt by the New Year. Instead of waiting until the last minute and swiping your credit card to cover holiday costs, set aside a few dollars every payday.
$20 a month adds up to $240 by the holidays (saving for 12 months starting in January), which can make a huge difference. Spokane Federal Credit Union even offers a designated Holiday Club Account that earns interest. The same concept goes for a vacation, wedding or any major purchase in your future. If you know it's coming, start saving now.
It takes a few months, at least, into your first job to get a true grasp of your budget. Patience is key. Don't overestimate your disposable income off the bat and start making impulsive purchases -- they might come back to haunt you. Just because your checking account balance is starting to grow, it doesn't mean you need to spend it.
On the flip side, don't limit yourself entirely either. It's human nature to seek enjoyment, so you should reward yourself from time to time. Just make sure you're rewarding yourself with money you don't need elsewhere.
Making smart financial decisions in your 20s will set precedent for your future. Having patience and understanding long-term goals are two skills you need to work toward, and the earlier you learn, the stronger your financial future will be.