Understanding your new paycheck: Part II
You understand how to read your new paycheck, now it’s time to spend what you’ve earned!
1. Invest in your 401(k)
Retirement may feel like it is years off and that you have plenty of time before you need to start saving for it, but it's time to get out of this mindset. For you to live comfortably in retirement you need a sizeable amount of funds saved up for the future years you will not be working. Some jobs might have a 401(k) match equaling what you put away from your gross pay before taxes, as long as it meets their minimum match requirement. It may take six months until they begin matching what you put in, but go ahead and take the extra deduction so you don't have to change your spending habits later. There is no such thing as a retirement loan, so don't make the mistake of waiting to start saving.
2. Establish an Emergency or Long-Term Savings
In the event of an emergency, it's important to have a savings account with at least three to six months' worth of pay in the case of an unexpected layoff from work, vehicle failure, or a medical bill. If you're unable to work or have an unexpected and hefty bill, you will have plenty of funds to fall back on in the meantime. Better safe than sorry as they always say.
3. Save for the Short-Term
Open an extra savings account for the possibility of small emergency expenses like a fender bender, or a minor house repair. This allows you to have a safety net for yourself in the event you need to pay an unforeseen bill that absolutely cannot wait. If you have this safety net to rely on, then you won't have to skimp on other places in your budget or cut into any necessities.
In a four-part Forbes article by Laura Shin  she states that if you don't have credit card debt every month you could pay 10 percent towards your retirement, 10 percent in your emergency savings fund, and 10 percent into your short-term savings or towards student loans. This is very ambitious, and does not include if your student loans are fixed. As long as you have a realistic financial plan, sticking to it, and always paying yourself first, you are setting yourself up for financial success.
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