Congratulations, you’ve ready to start your real job. Welcome to the world of work. Following are some tips you should follow to help get your career and financial life off to a good start.
Even though you’ve graduated you may not know exactly what you want to do or you think you do but once you’re in the world of work that may change. That’s OK. Many people’s careers evolve over time due to good career management and/or because of circumstances both good and bad that are out of their control.
Negotiate your first starting salary (and all pay increases thereafter)
Your starting salary will have repercussions throughout your entire career and financial life. As an example, if your starting salary is $30,000 and you get a 3% raise annually and work for 48 years your total lifetime earnings will be $3.256 million. If you accept a starting salary that is “only” $2,000 less or $28,000 you will earn $3.039 million in your lifetime. The difference is $217,000. Can you afford to leave $217,000 on the table?
Research what your position should pay.
The best place to start is by talking with people already working in your field. Some sources of information are:
- College instructors. Nowadays most college instructors are adjunct professors, people who work in a particular field full-time and teach part-time on the side.
- People in your field. Contact local companies or people in your field that you are not actually considering working for. Talk with someone in the human resources department or contact someone doing the same job that you are interested in.
- Professional associations. Contact a local chapter and find someone to talk with or meet.
You can also research online but this is more likely to give you only a a range of salaries. Salaries and compensation are going to vary by location. Some sources are:
- The Occupational Outlook Handbook: www.bls.gov/ooh
- The Bureau of Labor Statistics’ survey of salaries in individual industries. http://stats.bls.gov/oes/oes_emp.htm
- The Salary Expert: www.salaryexpert.com
Negotiate by comparing the entire compensation package
Most people, whether first-time employees or seasoned veterans, focus on salary alone when they’re looking for a job. While salary is a very important component, you need to look at the entire compensation package.
Your compensation is made up of more than just your starting salary. In addition to knowing the salary you should be earning, you need to determine what benefits are you looking for. You should view it as a comprehensive package that is made up of the quantifiable and non-quantifiable elements. You need to assess all of these elements for every job you are considering.
- Health insurance. Who is the carrier and how much does the employee have to pay?
- Dental insurance. Who is the carrier and how much does the employee have to pay?
- A 401k that is invested with a good mutual fund company such as Vanguard or Fidelity and that offers a match.
- Flexible spending account.
- Vacation and sick pay. How much do they offer and does everyone take their vacation time?
- Tuition reimbursement. How much does it cover annually? Does it cover an advanced degree you are interested in pursuing?
- Car allowance or company car. How much is it. If they give you a company car you may have to pay to park it somewhere?
- Expenses account for entertaining clients. Do you have to use your own credit car and they reimburse you or do they give you a company credit card which they pay directly?
- Company cell phone or cell phone reimbursement. Do they expect you to use your cell phone but they won’t reimburse you?
- Do they pay professional dues, memberships and subscriptions to professional journals?
- What are the scheduled work hours? Is a substantial amount of overtime required?
- Do they offer flex time?
- Can you work from home and do they have it set up so you can log in from home?
- Is the office business casual or formal? (Think drycleaning bills).
- Modern office. If the furniture is from the 1950’s? If everything looks old they probably won’t want to spend a lot of money on your salary or benefits either.
- Modern computer equipment. Do they have flat screen monitors and laptops? If they won’t spend money on modern equipment you might not be able to get your job done in a reasonable amount of time. Also they probably won’t want to spend a lot of money on your salary or benefits either.
- When you meet with them after 5pm is the office filled with people? They may be understaffed.
- Do people around the office look reasonably happy?
Sign up for the company 401k and contribute
Millennials have heard this over and over — start saving for retirement as early as possible. Even if you are paying down student loans you should try to contribute enough money to get the employer match, which is free money.
Keep your fixed living expenses as low as possible
Your largest fixed living expense will be putting a roof over your head. While it may be tempting to rent the fanciest apartment you can find, you should consider living at home for a while or renting the smallest apartment you can find. If you want to live like you did at your parents’ house, remember it probably took them years to get to that standard of living.
Depending on where you live. rent could take 28% of your income or more. This will prevent you from paying off your student loans faster or from being able to save any money for retirement, an emergency fund or for a down payment to buy a home. Ideally you should try to live at home for a while (and pay your parents rent).
Keep your variable living expenses as low as possible
The biggest purchasing mistake first-time workers make is rushing out and buying a new car. Unless your job requires a car (which your new employer should be paying for), honestly assess whether you need a car. If you truly do need a car, buy a high-quality used car.
A car is not an asset. New cars lose 25% or more of their value the minute you drive them off the lot. They continue to lose value until they are worth zero dollars and end up in the junk yard.
If you live in a major metropolitan area, you will either pay hundreds of dollars a month to rent a parking space or your car will be destroyed on the street. Think of weather damage, side swipes and dings and break-ins. Don’t forget about the cost of parking tickets and getting towed. Even if you were used to having a car while living in the suburbs with your parents, you will find that you will not use your car enough to justify the expense if you live downtown.
This money could be channeled into something that builds your net worth and improves your long-term financial future rather than “investing” in the junkyard.
Another cost area where first-time employees go crazy is clothing. You do need a work wardrobe but don’t buy it until you actually land a job. Depending on where you work, the dress code may vary. To build your wardrobe, start with high-quality classic pieces that you find on sale. Slowly add to your wardrobe as you find more items on sale. Avoid trendy and cheap clothing items that will fall apart quickly. And remember, you are not a “royal.” You can be seen in the same thing twice!
Generally there is not a lot of guidance on how to start off your career. For whatever reasons it really isn’t covered in college. You will be working for a very long time and you want to enjoy yourself but you shouldn’t neglect all the financial aspects of working. You want to get off to a good start because it can have lifelong ramifications for your future. Good luck.