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I’m 23 and Just Got My First Job, Now What?

Welcome to Part 1 of 3 of: “I’m 23 with my first job, now what?” Over the next three weeks I will expand on a question many of us will ask, have asked, or should have asked after getting our first big job and earning a decent paycheck for the first time. Part 1 is an introduction to a simple two-step philosophy. Part 2 and 3 will be a deep-dive into these two steps.


Let’s face it: a majority of us do not have a good handle on our finances in our early 20s. But whether you have just graduated college, are taking a 5th or 6th year victory lap, or on a different path altogether, our early 20s is the time to start learning. There is a good chance at this age you’ll land your first big job and start earning a paycheck. At this point is fair to ask, “now what?”

Now what

I did not ask that question and I made some mistakes that are easily avoided. For one, I bought a new truck. I also bought the biggest TV I could find at Costco, bought a new mountain bike and moved into a more expensive apartment for no legitimate reason. Eating out was frequent and I spent a lot on the weekends in general. I had a budget, but it looked something like this:

  • Receive paycheck
  • Spend most of paycheck
  • Question what to do with leftover cash
    • Option A: buy something (see: new truck, mountain bike)
    • Option B: put it into an emergency fund/savings account

I did more of option B than I let on, but I wish I that I had a better plan.

A better plan would have helped me prioritize my spending and given me a jump-start on my savings.

A better plan would have helped me with the question, “now what?”

A better plan

I was fortunate enough to receive this piece of advice on my very first day in my post-college job: Save 20% and live off of the rest.

That is a good piece of advice, and one I made sure to follow. That advice alone is the only reason I was able to build a decent sized portfolio over the last few years.

The downside to this advice? It’s only good if you plan on working for 40 years and retiring around 65.

Work until 65

If this is what you’d like to do, that is OK. A 20% savings rate will be fantastic for your retirement portfolio over the next 35-40 years. But what if you want something more? What if you want to reach financial independence earlier than 65?

For that, you will need a better plan. A better plan will answer the question, “now what?”

Now what?

What does a better plan look like? And what does that even mean, a “better plan”?

A better plan is one that follows straightforward guidelines in order to reach a specific goal. In this case, I’ll outline a plan to improve your financial security by prioritizing your expenses and increasing your savings rate.

The reason behind these the two specific actions of prioritizing expenses and increasing savings is simple: Of all the different options you have with your personal finances, no two actions will give you greater control of your financial future.

There can be multiple layers of actions beneath these, but taking action on these two areas is the first step.

Prioritizing your expenses

I get it, you’re making some real money finally!

But that doesn’t mean you should spend recklessly. Before buying a big ticket item, sleep on it for a few days and think about if you really need it. Legitimately need – not just want because a catchy advertisement tells you that you want it.

That said, go ahead and treat yo’ self a little bit.

Treat yo self

Take your partner out to a nice meal, buy that graphics card you’ve had an eye on, purchase that plane ticket to finally go see a good friend.

I wouldn’t recommend this type of behavior all of the time, but it is nice to reward yourself a little bit every now and then. Give yourself a nice pat on the back for getting that job you’re proud of.

But now it’s time to focus on your spending. Work to prevent mindless spending. Mindless spending is spending on anything that you buy out of habit, impulse, or needless subscription.

I highly recommend signing up for Personal Capital or Mint. Both are free services with intuitive websites and sleek mobile apps that will track all of your spending. All you have to do is sign up and sync your bank accounts, then watch the software do its job.

Keep a close eye on this for a couple of months to identify areas where you are spending excessively, or without thought. It’s important to eliminate unnecessary spending if you are ever going to get control of your finances.

Increasing your savings rate

I’ve talked about the importance of our savings rate once before. Nothing has changed – it is still the most important factor on the path to financial security.

The easiest way to increase your savings rate is to automate your savings. If possible, take money directly from each paycheck and put it into a retirement savings.

Don’t be tempted to put away a minimal amount. Recall the 20% above – that is a good savings rate if you want to work for a long, long time. It is too low if you want to be financially secure anytime before 60.

Using Personal Capital/Mint, find how much money you have left after all your expenses each month. Take that value and divide it by your after-tax pay. Once you know this number, set a goal to improve it. That could be from 20% to 30%. It could also be 0% to 10%.

Besides reducing expenses, here are some ways to start putting away money and increase your savings rate:

  • Build up some cash reserves in an emergency fund. Roughly 3 months of living expenses will do.
  • Make contributions to your employer’s 401k/403b retirement savings plan. If they match, contribute at least the minimum. Contribute more if they offer low-cost index funds.
  • Look into opening an IRA or Roth IRA and contribute to this. Use low-cost index funds.
  • Take any excess cash and put it into low-cost index funds.

Low-cost index funds came up in 3 of those 4 bullets. That is because you are better off asking your money to match the market, then paying someone to try (and fail) to beat it.

You want to always have your money working for you, not sitting idle. This is why I recommend putting your savings into the stock market. After time, your portfolio will build and compound interest will work it’s magic.

Get to work

Seriously, get back to work. You have to earn the money in order to save it!

In part 2 I will go into detail about Prioritizing Your Expenses. I will talk about the ways I have found success as well as the ways I have found failure. I hope these help you get your expenses figured out.

Personal finance isn’t a sprint and it isn’t a one-size-fits-all endeavor. You will have to find what motivates you and what works best for you.

That said, having a plan, a better plan, for managing your money will put you on the right path towards financial security.

As an added benefit, you will impress all of your friends with your newfound financial savvy.

Make it rain

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