Starting your first job and getting that initial taste of constant income is always exciting. Sometimes too exciting. That’s why it’s important to have a plan in place to ensure you don’t blow your whole salary the first year.
Here are some of the things you should keep in mind when you start your new gig:
- Set up auto transfers to savings account
The issue with putting money into a savings account is often that it’s too much work and you don’t have time do take out of your day and go to the bank. Luckily, there’s a way to trick yourself into saving money, set up automatic transfers from your checking to the saving account.
Even a small amount of $20 bi-weekly from your pay can add up in the future. All the banks out there have this service free of cost for customers. So go out there and make use of it and start saving!
(Pro-tip: If you don’t have a savings account, Tangerine is offering 2.4% interest on new accounts for first 6 months)
- Get a good understanding of your cash flow
If you are earning $75,000 annually, that doesn’t mean you are actually getting $6,250 in your bank account a month. Your cash flow is going to be less than $6,250 after deducting taxes, Canada Pension Plan (CPP), Employment Insurance (EI), and Contribution to benefits. Even though you are getting paid $6,250 your actual in hand cash will be around 10% lower so budget accordingly.
- Fully Utilize your Benefits Package
There’s a high chance that your employer has a benefit package in place for its employees. It is always a good idea to look at that benefits booklet that you get along with your offer letter or ask HR about the benefits package.
You’ll be surprised to know how many medical expenses are either fully or partially covered in the plan (sometimes including dental coverage)
So, to ensure you are taking full advantage of that benefits package, contact HR or your supervisor as soon as your probation is completed.
- Participate in your employers RRSP program
It is always a good idea to check with your company to see if they offer RRSP matching program, again there is a high chance they are offering a matching program. In that case, it is free money for grabs, so don’t forget to grab it!
Here’s an explanation of an RRSP matching program. You are allowed to contribute say 1% of your paycheck to RRSP, which comes up to $60, your employer then matches the amount you contributed (in this case $60) and invests that whole amount in a portfolio. After that you just sit back and relax and watch your money grow, professionally managed.
- Do not miss out on employee ownership program
If you start working for a company whose shares are publically traded, then there is a high chance the company has an employee ownership program. What it means is, either you can buy the shares of your company at lower than market price, which is great, or your employer contributes a certain percentage of the amount you paid to buy the share. For example, if you buy shares worth $50 then your employer chips in $5 from his pocket to make your total purchase of $55, which is again great!