Starting out in your first professional job is probably one of the most critical periods of your life when you will need to save money. Unfortunately, for many young women, it is also one of the most difficult periods to put anything aside. Setting up a home, making payments on college loan debt, and obtaining the basics of life such as a car and a professional wardrobe make it extremely hard to find any money left over at the end of the month. Fortunately, it is possible to save money as a young professional without sacrificing too much in the way of lifestyle.
Start out by taking a close look at the direct deposit form you’re given on your first day of work. While many people simply have their entire paycheck deposited into their checking account, there are several ways to fills out this form that will help you to save automatically.
For example, very few people realize that it is possible to divide their paycheck among several different accounts. Direct a portion of your paycheck towards a retirement account such as an IRA. If possible, try to save the maximum amount allowed. If you are investing in an IRA, take the $5000 maximum allowable contribution and divide it by the number of paychecks you get in a year. Have this amount deposited into the retirement account every pay period.. Because you have not adjusted your lifestyle to the total amount of your paycheck, it will be much easier to get in the habit of saving for retirement immediately.
Beyond this, also try to set aside at least ten percent of the remaining money every pay period into a savings account. Over time, this will become your emergency and unexpected expenses fund. After doing this, base your budget on the remaining amount of money.
In order to create a budget, you will need to start by writing out a list of all your income. For many young professionals this list will only include the number you calculated in the previous step, but some people will have second jobs, small business profits, or investment income that will need to be included. From the total of this list, subtract all of your mandatory expenses. This includes expenses such as rent, utilities, transportation costs, debt settlement and minimum loan payments, as well as your insurance premiums. Any money that is left over after paying for these things is the amount that can be spent on entertainment and extra debt repayment.
Getting your debts repaid quickly is another way to save money. By paying off debt, a person is not only able to avoid paying interest, but he or she is also able to reduce their monthly expenses. By keeping your expenses low, you will have a lot more flexibility regarding where and when you choose to work.
Ideally, try to devote at least of any “extra” money at the end of every month to paying off debt. Make a list of all your debts and apply the total of this money to the debt with the highest interest rate. By doing this, you will be able to pay off your highest interest debts the fastest and pay less in interest charges.