Starting Your First Job? Four Financial Tips to Start Right

Beginning your first job can be an incredibly exciting time—more than any other milestone, it often signifies the final part of the transition to adulthood. And though it may not seem like it now, some of the financial steps you take at this early juncture have the potential to impact the rest of your life. Below, learn more about four ways you can get your financial future started off on the right foot.

Make a Student Loan Repayment Plan

The average amount of student loan debt (among those who have student loans) is just over $32,000¹ . And while most student loan borrowers have between $25,000 and $50,000 in debt, even this amount can be a budget strain if you're earning at or around the median income of $48,000 per year². Fortunately, there are several different ways to repay your student loans, making it easier to create a repayment plan that fits your budget and your needs. Contact your loan servicer or visit their website to gather information on all your options.

Evaluate Your Healthcare Choices

If you're like many, your first job will offer healthcare benefits like health, dental, and vision coverage. Taking advantage of an employer's healthcare plan can provide many benefits; these plans offer a financial safety net if you suffer a major illness and help you access preventive care at low to no cost.

However, healthcare plans can be very different, and there's no one-size-fits-all approach. If you have a high-deductible health plan (HDHP), you may be eligible for a Health Savings Account (HSA). This allows you to set aside pre-tax funds to pay for eligible medical expenses. Unlike Healthcare Flexible Spending Accounts (FSAs), which have the "use or lose" rule, HSAs can roll over a balance from year to year.

But HDHPs and HSAs aren't right for everyone. Those with chronic or expensive health issues may benefit from a lower-deductible plan to limit out-of-pocket expenses. You may want to consider your healthcare costs and needs over the past few years to get a better idea of which plan may be right for you. Learn how to choose between a high deductible and low deductible plan

Protect Against Uncertainty

For those just starting their first job, your earning potential is by far your most valuable asset. Two of the best ways to help protect this earning potential are life insurance and disability insurance.

Life insurance is designed to provide a lump sum benefit to your surviving family members or loved ones in the event of your untimely death. These funds can be used to pay funeral expenses, pay off a mortgage, allow a surviving spouse to take a break from the workforce, or provide for your children's future education.

Disability insurance can help offset loss of wages if you're forced out of the workforce due to a covered injury or illness. Many employers offer low-cost disability coverage as part of their array of employee benefits, or you can purchase a private disability insurance policy from a broker.

Get a Head Start on Retirement

Your first job presents you with one of the best times to start saving for retirement. Each dollar you put away now will have far more spending (and growing) power than the dollars you put away when you're closer to retirement. Diligent saving now can also allow you to dial back your savings rate once you have bigger expenses.

There are several retirement savings plan options available to many employees.

401(k) (or 403(b)/457(b)) for government employees): These plans allow you to set aside pre-tax funds, up to $23,500 in 2025 ($23,000 in 2024). However, if your employer doesn't offer a 401(k), your retirement choices may be limited to an IRA.
Traditional IRA: Like the 401(k), this offers a way to set aside up to $7,000 pre-tax in year 2024 and 2025 (subject to income and filing status limits) in an account you control.
Roth IRA: A Roth IRA also allows you to set aside post-tax funds of up to $7,000 in 2024 and 2025 (subject to income and filing status limits). The growth on these funds is tax free and qualified withdrawals for all assets from the Roth IRA are tax free.

For those who contribute to an IRA, remember—the $7,000 annual contribution limit is a combined limit that applies to both types of accounts. Learn more about Roth vs Traditional IRA

Check out these other articles to help you navigate your benefits in your first job:

This blog is up to date as of November 2024 and has not been updated for changes in the law, administration or current events. This information is intended to be educational. It is general in nature and should not be considered financial, legal or tax advice. Consult an attorney or a tax professional regarding your specific situation.