How to manage your first salary

After networking, applying and interviewing, landing your first job is a major relief—and a big accomplishment. It also brings new responsibilities as you learn how to manage your first salary, budget for your lifestyle and develop smart savings habits.

As you prepare for your first day, it’s critical to start thinking about how much of your paycheck you should save. To help you learn how to manage your first salary, financial experts share tips for saving money, creating smart habits and making the most of your paycheck. They also explain how to adjust your savings strategy as your career advances and income grows.

Figuring out how to manage your first salary can feel overwhelming. That can be especially true if you’re carrying student debt or feel like your paycheck doesn’t stretch as far as you’d like. When you deposit some of your paycheck into a savings account, you may be able to earn interest on the balance. Plus, your interest itself will earn interest, too.

Saving money at your first job might also make sense because you likely aren’t juggling the large financial commitments you’ll face later in life.

So how much of your paycheck at your first job should you save?

When determining how much of your paycheck you should save, you might find at first that there isn’t enough cash left over. If that’s the case, create a budget to track your income and expenses. If you already have a budget, look for unnecessary expenses you can cut to free up more money for savings.

If you’re not able to hit these savings goals right away, don’t worry. The key is to save what you can, and you can gradually work to increase your savings over time.

To help you get in the habit of saving money at your first job, define exactly what you’re saving for. Need some ideas?

When learning how to manage your first salary, prioritize an emergency fund. A top reason you need an emergency fund is the stability and peace of mind that it  can offer if you face an unexpected expense like a costly car repair or losing your job.

Once you’ve started building your emergency fund, consider keeping it in a Capital One 360 Performance Savings account.

Consider your emergency fund one of multiple savings accounts. In addition to an emergency fund, you can create separate savings funds for other financial goals. For example, you might save for a car, a vacation or another purchase that’s important to you.

However you define your goals, the important thing is that they’re clear to you and that you’re actively saving money at your first job. This positive momentum can guide smart savings habits even once your first day of work is a distant memory.

Even with the best savings goals and intentions, it can be easy to get off track. That’s where automation can be helpful. By automating your savings, you reduce your chances of overspending or skipping savings altogether.

Capital One’s Paycheck Percentage tool offers a simple, hands-off approach to building your savings every time you get paid. Or you could ask if your company’s payroll department allows you to split your direct deposit, sending some of each paycheck into your checking account and some into savings.

Another consideration when learning how to manage your first salary is where you’ll keep your hard-earned funds. Many people opt to open a savings account from the same bank where they have their checking account.

As you do your research to find the right savings account for saving money at your first job, it can be helpful to compare interest rates, fees, and product terms.

Fees can reduce your interest earnings, and you may not want to worry about keeping a minimum balance when you’ve just landed your first job and are gradually building up your savings. Capital One 360 Performance Savings accounts are fee-free. Add in no minimum balance requirements and you have more money in your wallet.

As you manage your first salary, saving for emergencies and other short- and medium-term goals is essential. But you also want to start saving for retirement, even if that’s years away.

Your 401(k) contributions automatically come out of your paycheck, so you won’t even have time to miss the funds. Consider consulting a tax advisor to discuss your specific situation.

As you advance in your career, you’ll likely see an increase in your take-home pay. After a bonus, promotion or new job, your first inclination may be to spend more because you’re earning more.

While you deserve to celebrate your career wins, determine how you can maintain (or even accelerate) your savings progress as you increase your earning potential.

If you’re earning more while keeping your living expenses manageable, consider putting some of your extra income toward your 401(k) or another savings goal. For example, you could save for a down payment on a home instead of increasing your spending.

Keep these tips in mind as you start your career and continue to build your savings. Over time, those habits can help you reach your financial goals and feel more financially secure.

Your first regular paycheck is a chance to build money habits that can last a lifetime. Small, consistent steps today can help you reach your financial goals and feel more confident about your future.

When you consider how to manage your first salary, remember:

• Even small savings can add up over time, especially when you start early and let your money grow. 

• A budget, automatic transfers and a high interest rate savings account can help you save more consistently. 

• As your income grows, increasing your savings and retirement contributions can help you build long-term financial security.

Worried about bills coming due before you have the funds? Capital One’s early paycheck feature can help you get a direct deposit in your 360 Checking account up to 2 days early, giving you the breathing room you need.