For Recent Graduates: How to Handle Your Paycheck Like a Boss

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Getting your finances in order can be tricky for people of all ages. Whether you are a recent college graduate like me, starting your first full time job, or just feeling a bit overwhelmed with all the “adulting” going on around you, here are some important strategies you should consider.

Direct Deposit for Investing

Congratulations! You have a paycheck coming into your bank account! With great power comes great responsibility. Do your future self a favor and take the time to pay yourself first. This means utilizing your paycheck’s direct deposit to make sure that you contribute to your invested savings before you make the funds available for your daily spending.

An easy way to do this is to deposit all of your income to an investment account. Then, only transfer the money you need for your everyday expenses to your checking account. If you automate both the deposit and the transfer, then you will have automated saving and investing.

Nervous about investing for the first time? Check out our Marotta’s Gone-Fishing Portfolios for a basic asset allocation. A gone-fishing portfolio is a portfolio of just a few stocks which should weather the ups and downs of the market fairly well while only rebalancing twice a year. We designed these gone-fishing portfolios with people who are just getting started with investing in mind.


Not sure how much of this new income you should be saving? Start by establishing a budget and stashing away 10-15% of your income while you figure out your monthly expenses. Once you have a handle on those expenses, save even more, especially if you are young, single, and don’t have any dependents. You likely won’t have enough money to do all the things you want at first, but it’s important to train yourself to save for what you really want instead of spending impulsively. You will be glad you did when you find yourself in need of cash for an unanticipated expense like a major car repair.

Strategize Student Loan Repayment

If you recently graduated with student loans you are probably approaching the time when your grace period ends and you must start making payments. Our article, “How Quickly Should I Pay My Student Loans?” explains that you should not be swayed by the lender’s enticing attempt to convince you that you should be repaying the loan quickly. If you invest the extra money that you might use to pay more than the minimum payment, you will likely have grown significant savings in your investment account by the time you have paid off your entire loan. You are probably anxious to leave those loans behind you and get on with your life, but the best way to accomplish this is to pay the minimum and start saving and investing toward your future financial security.

Take Advantage of Employer Retirement Plans

It may seem crazy to talk about retirement when you’ve just entered the working world, but you’re never too young to start saving for it. Does your employer have a swanky 401(k) plan you were given lots of confusing information about? If you aren’t sure how it works, talk to your human resources department to find out.

Here are some key things to know:

Get your employer match. How do you like the sound of free money? If your employer offers to match a percentage of your paycheck that you put away for retirement, take advantage of that by deferring enough of your salary to maximize the employer match. That match is free money you only get if you defer some of your paycheck for retirement.

Consider Roth deferrals. Does the 401(k) offer post-tax Roth deferrals for your employee contributions? Even if your first job pays well and you are making big bucks already, you are likely in the lowest tax bracket you will ever be in. By paying taxes on those contributions today your retirement money will grow tax-free. It is better to pay tax on the contributions now rather than leave a tax liability to when it is time to make withdrawals in retirement.

Set a smart asset allocation. If you were given a list of available funds to invest in, your first instinct might have been to invest an equal amount of money in each fund. Although that seems like a simple decision, it’s worth doing a little research to find out more about the funds. There are lots of sites like Morningstar and Yahoo Finance that have loads of information on the securities in the available funds. For example, look up each security’s expense ratio. By selecting those with low expense ratios, your overall investment return might be higher.

Save in a Roth IRA too. Does your employer’s 401(k) have a waiting period before you can participate? Don’t let that discourage you from saving for your retirement anyway. Open a Roth IRA to save up to the IRA contribution limit annually. If that is more than you can afford to save right now, just save as much as possible. An easily overlooked advantage of a Roth IRA is that it can double as an emergency fund. The money you contribute is always your own, so you can withdraw it penalty- and tax-free at any time. Just make sure not to withdraw any earnings that have grown on top of your initial contributions.


Now that you’ve read this article, you have some good ideas on how to handle your paycheck. But how do you implement them? Avoid making the mistake of stashing all of your cash under your mattress or in the bank. The diminishing purchasing power of inflation will wreak havoc on your future spending goals. When I first started working, I felt stressed about getting my finances in order and was nervous about investing on my own, and I do this for a living! It can be extremely difficult to overcome the stress when you are dealing with your own money, and it’s natural to be nervous when the markets can seem so unpredictable. Take a leap of faith and invest a small amount; give it time to grow and you will reap the benefits of your patience before you know it. If you are just getting started with investing and have not yet selected a custodian, we recommend either Vanguard or Charles Schwab.

Financial security is an amazing feeling, so why not live your life knowing you are prepared for life’s expenses and can plan ahead for all your future goals.

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Wealth Manager

Libby Horbaly is a Wealth Manager at Marotta Wealth Management. In addition to writing articles, she is one of our primary editors and image selectors for Marotta on Money. In her spare time, she enjoys reading, sailing, and spending time with her family.