7 Do's and Don'ts for New Grads Getting Their First ‘Adult' Paycheck
Receiving your first adult paycheck as a new college graduate can be exciting, but the excitement could quickly turn to regret if you don't choose the right way to spend (and save) it.
Jack Howard, head of money wellness at Ally, said that the new salary figure can tempt spending and new grads may have to acknowledge that their paycheck doesn't stretch as far as they thought due to taxes, benefits and new monthly student loan payments.
Read Next:
Check Out:
Here are some do's and don'ts for graduates getting their first 'adult' paycheck.
Net pay is different from gross pay. Gross pay is the amount you earned prior to any taxes or deductions being taken out. Net pay — aka 'take-home' pay — is the amount you receive after taxes and deductions are removed.
Howard suggested that when building a monthly budget, new grads should work backward from their net pay, subtracting all fixed and variable expenses to arrive at a disposable income figure. However, she also said not to forget to factor in potential 'hidden costs,' such as afternoon coffee runs or a midday lunch.
'Before you arrive at your remaining disposable income figure to play with for the month, make sure all those sneaky, everyday expenses are already considered,' she recommended.
Explore More:
Howard said that new grads might miss out on the opportunity to maximize retirement contributions if they don't take advantage of what their employers offer, like a 401(k) match.
'If your company offers it, it's recommended to contribute up to their match and if not, opening a Roth IRA is a good option too,' she said. 'A lot of companies will offer additional benefits like a 529 match to help pay for grad school, tuition reimbursement, Health Savings Accounts which offer a triple tax advantage or access to a free certified financial planner who help create a plan for your financial future.'
Howard explained that the amount you 'pay' yourself from each paycheck — money that goes toward savings or investments — will vary depending on salary, but allocating 10% to 20% of your paycheck is generally recommended.
She also recommended establishing an emergency fund with three to six months' worth of living expenses. If that amount seems intimidating, Howard suggested focusing less on the total amount needed and more on creating the habit of setting aside the money. Then, she said, as your income increases, the amount of money you can save per month will also.
For graduates who took out student loans, it's important to prioritize student loan payments as soon as the paychecks start rolling in.
'You may still be riding the high of graduation, but figuring out your total loan balance and monthly payments as soon as possible is important to set yourself up for financial success,' Howard explained.
She also said paying more than the minimum can help you pay off loans faster and cut down on interest.
Howard said that one common misconception about saving is that each deposit must be hundreds of dollars, but that's not the case. She explained that it's possible to make meaningful progress by 'microsaving,' which involves saving small amounts of money consistently.
She also recommended saving extra income, such as a tax refund, birthday cash or money from a side hustle.
Automating payments is a smart move, and one of the most foolproof ways to stay consistent with your financial goals, according to Howard.
'Scheduling payments and deposits not only saves time, but it also helps you avoid late fees or potential harm to your credit score,' she said.
Lifestyle creep is when you spend more just because you're earning more. Howard said that it's a common mistake young people entering the workforce make, especially when factoring in FOMO (fear of missing out) or other pressures from social media.
'Ally's recent Minds on Money report found that nearly 40% of Gen Z have gone into debt to maintain appearances on social media, with nearly a third buying items they saw on social media either immediately or the same day,' she said. 'If you find yourself committing to group trips, fancy dinners or overspending on the latest fashion items just to 'keep up,' consider financial wellness resources like Money Roots, a free program based in money psychology that can curb bad money habits while still empowering you to enjoy your money — without outpacing your new salary.'
More From GOBankingRates
Surprising Items People Are Stocking Up On Before Tariff Pains Hit: Is It Smart?
The Most Expensive Disney Merchandise Ever Sold -- and Who's Buying It
4 Affordable Car Brands You Won't Regret Buying in 2025
Source
Jack Howard, Ally
This article originally appeared on GOBankingRates.com: 7 Do's and Don'ts for New Grads Getting Their First 'Adult' Paycheck
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
14 hours ago
- Yahoo
Brown County and C. Reiss agree to lease Pulliam property, but not for coal
The Brown County Board voted to approve a deal June 5 with Green Bay and C. Reiss Co. to relocate the coal piles to the Fox River Terminal and use the former Pulliam site to store C. Reiss' bulk commodities. Many eyes were on Green Bay and Brown County this week as officials inched closer to a deal that had $15 million at stake. The deal marks a historic milestone to a decades-long effort to relocate the coal piles from its 125-year home at 115 W. Mason St. Under the agreement, C. Reiss will lease the former Pulliam power plant to store salt and other bulk commodities instead of coal. The terms still fulfill decades of community leaders' goal to free up prime riverfront property for industrial, commercial and residential use at the mouth of the Fox River. The Brown County Board unanimously voted to approve the terms of the agreement. Board member Dixon Wolfe was not at the meeting. Former Green Bay mayors Jim Schmitt and Paul Jadin awaited the County Board's momentous vote, along with state Sens. Eric Wimberger, R-Oconto, and Jamie Wall, D-Green Bay; and state Reps. David Steffen, R-Howard; Ben Franklin, R-De Pere; Ryan Spaude, D-Ashwaubenon; and Amaad Rivera-Wagner, D-Green Bay. C. Reiss will lease 16 acres of the Pulliam site to store bulk commodities. The coal piles will be housed at the Fox River Terminal. Lease payments with a rate of $350,000 per year with increases every five years during the first 25 years based on the Consumer Price Index. The length of the lease is 60 years and can be extended. The lease needs to be executed by Sept. 25, according to the agreement. The new plan is a notable shift from previous proposals that had intended to make the Pulliam site the new home of the coal piles. Key parties were sorting out the agreement just a few minutes before starting the County Board meeting June 5, Buckley said ahead of the vote. The board voted on the deal June 5, just hours before the deadline to retain the $15 million state grant. The Wisconsin Department of Administration gave the County Board until June 6 to approve terms of a deal after extending the deadline from the end of May. Brown County agrees to buy the 43.75-acre Pulliam site for $2.7 million in January 2021. Brown County approves the Pulliam site purchase and agrees to sell almost 10 acres of the site to GLC Minerals for an expansion in February 2021. Gov. Tony Evers awards the city and county a $15 million Neighborhood Investment Fund Program grant funded through American Rescue Plan Act dollars in March 2022. Former Transportation Secretary Pete Buttigieg presents the county with a federal $10.1 million Port Infrastructure Development grant to support the project in May 2023. Offers, counteroffers and rejections began in mid-December 2024 when the county officials and C. Reiss tentatively agreed to a $26 million plan that would lease 14.5 acres of the Pulliam property to C. Reiss for up to 75 years at a rate of $110,000 per year with an annual 2.5% increase. The County Board on Dec. 18, 2024, approved modified terms that reduced the lease to 40 years, changed the portion of the Pulliam property C. Reiss would use and added air quality compliance measures. C. Reiss considered the changes a rejection of the negotiated deal. The county's Port of Green Bay published a request for companies' general interest in using the new port site envisioned for the Pulliam property in January 2025. C. Reiss was one of eight to respond with a $28.5 million proposal to improve and use the Pulliam site for coal storage. C. Reiss in mid-March formally rejected the County Board's terms and proposed the county and company spend several months negotiating a deal. The County Board on March 19 rejected the company's offer. The county instead sought to shift negotiations to two alternate sites for coal storage, saying the Pulliam property's future use would be determined by the request for interest process. State officials in March gave the county, company and city a May 30 deadline to reach a deal to relocate the coal piles to the Pulliam site or lose the $15 million grant. Two new proposals emerged in late May as the county, company and city jointly met to discuss options and ideas. State Sen. Eric Wimberger, R-Oconto, on May 23 asked the state to extend the May 30 deadline and the Department of Administration did so on May 30, giving the parties until June 3. Brown County and C. Reiss reached a tentative agreement June 3 and announced the parties would put together the terms in writing June 4 and 5. More: Who still uses coal? Answers to questions about Green Bay coal piles and the possible move More: Brown County, C. Reiss strike deal to move coal piles after extensive negotiations Press-Gazette reporter Jeff Bollier contributed to this report. Contact Benita Mathew at bmathew@ This article originally appeared on Green Bay Press-Gazette: Brown County votes on C. Reiss deal for coal piles
Yahoo
17 hours ago
- Yahoo
401(k) savings rate hits record but balances drop 3%: Fidelity
(NewsNation) — Workers are putting away more in their 401(k) plans than ever, but market volatility dragged retirement account balances lower in the first quarter, a new analysis shows. Average 401(k) balances fell 3% to $127,100 in the first three months of the year, according to Fidelity, one of the nation's largest retirement plan providers. Fidelity attributed the drop to 'market swings,' which also impacted individual retirement accounts, where average balances fell 4% to $121,983. Americans tapping 401(k)s to pay for financial emergencies But market fluctuations didn't stop workers from saving, with the average 401(k) savings rate hitting a record 14.3% in the first quarter. That included an employee contribution rate of 9.5%, plus a 4.8% employer contribution. 'Although the first quarter of 2025 posed challenges for retirement savers, it's encouraging to see people take a continuous savings approach which focuses on their long-term retirement goals,' Sharon Brovelli, Fidelity's president of workplace investing, said in a release. The most recent 14.3% savings rate is the closest it's ever been to Fidelity's 15% recommended rate. What is a Roth IRA for kids, and how does it work? Five years ago, in 2020, the total savings rate was nearly a full percentage point lower at 13.5%. While that difference may seem small, over several decades, it can add up to tens of thousands more in a nest egg. Roughly 17% of workers with Fidelity 401(k) accounts increased their savings rate in the first quarter, while just 5% decreased. Fidelity's quarterly analysis of 25,300 corporate plans covering 24.4 million participants also revealed significant differences between industries. Employer 401(k) contributions were highest in the airline and petrochemical sectors at 8.2%, while retail and scientific & technical industries saw the lowest at 3.1% in the first quarter. Meanwhile, the employee contribution rate was highest in the tech sector (12.8%), followed by pharmaceutical employees at 12.1%, Fidelity found. 401(k) savings rates and account balances also vary by age, with those nearing retirement contributing more. Here's how different generations at Fidelity compared in the first quarter of 2025: Baby Boomers (born 1946-1964) Avg. balance: $239,600 Total savings rate: 17.2% Gen X (born 1965-1980) Avg. balance: $187,400 Total savings rate: 15.4% Millennials (born 1981-1996) Avg. Balance: $66,800 Total savings rate: 13.5% Gen Z (born 1997-2012) Avg. balance: $13,900 Total savings rate: 11.2% Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Yahoo
21 hours ago
- Yahoo
A 4-step guide to investing success for recent college grads
Start investing early to leverage compounding for long-term financial success. Financial planners recommend budgeting, building a buffer, and opening investment accounts. Consider a diversified portfolio with stocks and bonds, adjusting for risk tolerance. So you've just graduated from college. Congratulations! It's an exciting time in your life as you get ready to enter the workforce. One of the great things about being at the start of your career journey is that you have ample time to figure out the path you want to take in life and where your passions lie. Time is also your greatest asset when it comes to setting yourself up for a life of investing success. Thanks to the power of compounding, which Albert Einstein famously called the eighth wonder of the world, the earlier you start investing, the better. According to insurance firm Mass Mutual, a 22-year-old who invests $500 a month will have $2,255,844 by age 65, assuming the stock market delivers an average annual return of 8%. That number falls to $972,542 if one starts investing at 32. But investing isn't always easy, especially early on in your career when your earnings are lower. The process may also feel daunting and complicated if you haven't done it before. To put those fears to rest, we've come up with a step-by-step guide on how to best get your financial house in order so you'll thank yourself down the road. There's no one-size-fits-all approach for budgeting, so it's important to come up with a plan that works for you, said Melissa Cox, the Dallas-based owner of Future-Focused Wealth. Trying to keep up with someone who may have a different budget than you do is one of the most common mistakes she sees young people make. "So many people come out of school and they just go crazy spending money," Cox said. "Social media and everyone sees what everyone else is doing — don't fall into that." A good rule of thumb is to set aside 20% of your pre-tax income, according to Bryan Kuderna, the founder of New Jersey-based Kuderna Financial Team. So, if your salary is $100,000, you should be trying to save $20,000 a year. But again, the practical savings rate will vary from person to person. Many recent grads have student loans to tackle, so it's good to understand what your repayment options are, Cox said. Maybe forgiveness is possible, or lower monthly payments based on your income. Perhaps refinancing your loans will allow for more manageable payments. Finally, it's important to keep yourself a priority, Cox said. For example, perhaps you really value traveling or shopping — it's good to set some money aside for those things as well. When you start working, it's smart to set up a retirement account like a 401(k) or Roth IRA and start contributing right away. But we'll get to that in the next section. When it comes to your money outside those accounts, the first thing you want to do — assuming you don't have credit-card debt — is build up a buffer of six months of living expenses, Kuderna said. This is because people in their 20s often have big life events that they need the money for, he said. Having it in risky assets like stocks makes it vulnerable to downside in the near term. "I always say liquidity is huge for a young professional," Kuderna said. "I might move out, I might have to get a new car, I might be getting engaged, married, a kid — all these things that can happen in your 20s." While you might not want your money invested in stocks right away, you also don't want to have it just sitting in a checking account. Instead, plug it into a high-yield savings account or a money market fund to collect a better yield while short-term interest rates are still high. OK, now for the investment accounts. First, make sure you have a Roth IRA or 401(k) set up with your employer and are collecting their monthly minimum match. As of 2025, you can contribute up to $23,500 to a 401(k) and $7,000 to a Roth IRA. 401(k) contributions are made with pre-tax money; the money is then taxed upon withdrawal. Roth IRA contributions are made with post-tax income, and eventual withdrawals are not taxed. Setting these accounts up is important because the money comes straight out of your paychecks — it's like it never existed, and there's less of a temptation to spend it since withdrawals before you're 59-and-a-half years old are penalized at 10%. Plus, you can take advantage of the tax benefits. "I'm huge on Roth options, especially for young people," Kuderna said. "If we can get tax-free growth for another four or five decades, that's worth its weight in gold." Once those are set up, open up a brokerage account to invest your excess savings. Considering your cash savings, Kuderna said this is taking a three-pronged approach: having cash for the short-term, a brokerage account with stock investments for the medium-term (maybe a down payment for a house in five, 10, or 20 years), and retirement accounts for the long-term. Having a brokerage account for medium-term investments will allow you to capture potential market upside while not being subject to the 10% penalty of withdrawing money from a 401(k) or Roth IRA early. "You don't want to neglect the mid-term," he said. "When you're 40 or you're 50 and you need money, you don't want to hit your retirement accounts, and you don't want to have it all just sitting in cash." Now that you have your accounts set up, it's time to decide where to invest. The classic portfolio structure is 60% stocks and 40% bonds. Stocks, while riskier, offer greater upside potential. Meanwhile, bonds are supposed to act as a buffer to stock market volatility by protecting your capital, producing a steady yield, and appreciating during times of economic distress. But since you're in your 20s, you might consider allocating even more of your money to stocks since you can likely withstand more volatility, according to Chris Chen, the founder of Insight Financial Strategists. He said an 80/20 portfolio may be more appropriate. How you allocate money in your medium-term and long-term investment accounts may look different, however. For your 401(k) or Roth IRA, one simple way to invest for the long term is by buying a target-date fund. For example, you might choose the Vanguard Target Retirement 2065 Fund (VLXVX) or the State Street Target Retirement 2070 Fund (SSGQX). These funds automatically adjust your allocations to stocks and bonds as you age. As you start to approach retirement, the percentage of your money in bonds starts to increase to preserve your capital. Right now, the Vanguard 2065 fund has 53.1% of its assets in the Vanguard Total Stock Market Index Fund, which is made up of US stocks; 37.5% of the fund is in the Vanguard Total International Stock Index Fund; 6.5% is in US bonds; and 2.9% is in international bonds. Expense ratios, or the fees that certain funds charge, are also something to keep in mind. The Vanguard Target Retirement funds, for example, have a fairly cheap expense ratio of 0.08% a year. The cheapest S&P 500 index fund is the Fidelity 500 Index Fund (FXAIX) at 0.015%. For your medium-term investments, you should assess your risk-tolerance and timeline. Stock valuations are high at the moment, which suggests average 10-year returns may not be great. So if you need the money in five-to-10 years, being fully in stocks might be the wrong approach. But if you feel you can have a longer timeline than that, Kuderna said investing in bluechip stock indexes like the S&P 500 is a good approach. If you want to be especially aggressive, you might consider investing heavily in tech stocks, he said. The sector is often riskier than other areas of the market, but has seen explosive growth over the last 15 years. Some funds that offer exposure to tech stocks include the Technology Select Sector SPDR Fund (XLK), the iShares US Technology ETF (IYW), and the Invesco NASDAQ 100 ETF (QQQM). "If you look at the greatest returns over a long period of time, it's in equities, it's people who have a higher risk appetite," Kuderna said. "If you've done those beginning steps of building a rainy day fund, setting money aside, not carrying any bad debt — if you're good there and we can afford ourselves a long-term time horizon, then we should try to almost encourage ourselves to be a little more aggressive." Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
