Top 5 Things Millennials Should Do With Their First Paycheck

Congratulations! You’ve just scored your first job. So what should you do with your premiere paycheck? These five actions will help get you into a positive financial mindset and establish smart money habits.

1. Put at least 20% of your paycheck into a savings account

Millennial money habits tend to give the age group a bad financial reputation, even if unfairly. As a whole, though, millennials’ savings actually fall in the negative range. Older generations haven’t fared much better in this area, although the average savings rate in the United States was over 10 percent in the 1980s.

Elizabeth Warren and daughter Amelia Warren Tyagi established a new standard of 20 percent in their personal finance book “All Your Worth: Your Ultimate Lifetime Money Plan.” For someone making $35,000 a year, one-fifth comes out to about $500 monthly. Since many of us don’t even consider savings when creating a budget, you’ll be light years ahead of most people in terms of financial preparedness.

2. Create an emergency fund for unexpected expenses

One main reason you should establish an emergency fund is to avoid adding to your debt. Life tends to get in the way of accomplishing your financial goals. Having money set aside means you can pay for medical expenses, car repairs, emergency travel and vet bills without breaking out the credit card. And if you lose your job, you’ll have one less reason to stress out while searching for a new one.

3. Pay off any debt you have as soon as possible

Debt can weigh you down and stop you from pursuing your dreams. Student debt in particular has a way of hanging around for decades, making you feel like you’ll never be free of those massive payments. One in four people in the U.S. carry student debt averaging $37,172 and equating to monthly payments of almost $400. Paying off your debt now means freeing up money for other goals, but it also means saving a lot in interest alone. That leaves you with more money to sock away for your first home, put into savings and even reward yourself at some point. Try reframing your thoughts on money. If you usually reward yourself with an amazing meal or new clothes, swap out your reward for something smaller. Think of a fat savings account and a debt-free life as the real reward.

4. Invest in yourself by taking classes or buying books that will help you grow professionally

Courses for college credits or certificates can make you infinitely more marketable. Bulking up your job skills can help you grow in your existing career, garner bigger raises and give you an edge in a bad economy. And if your current employer makes staffing cuts or goes belly-up, you’ll have more opportunities and most likely be hired more quickly. Most schools offer online classes to fit your work schedule, and many employers offer tuition reimbursement.

5. Start saving for retirement with the company 401k plan, if offered to employees

In the past, most people counted on Social Security to fund the bulk of their retirement. It’s estimated that, although the agency will still make disability payments, the old-age side of its funding will be gone by 2034. Investing in your company’s 401k is a smart choice because it diversifies your retirement funding and provides tax savings. You can lower your tax bill by deducting 401k contributions on your return. And if your employer matches contributions, your retirement fund will build even more quickly.

Hamna Amjad is a blogger with features/mentions in Brit+ Co, Best Company, G2, and others. When she isn’t getting nagged by her husband or 2 kids, she spends time writing about or trying a new DIY project at her home.

Twitter: @HamnaAmjad

Photo credit: 1) Photo by Keira Burton from Pexels. 2-3) Source.