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Starting a new job can be nerve-racking , but it's also exciting. You're embarking on a new future, positioning yourself to write a fresh story on a clean slate. —Adena Friedman
When you accept your first job, you will probably get a packet of information someone from someone in the Human Resources department detailing your options on health insurance, dental and disability insurance, vacation time, flex savings, HSA accounts, retirement contributions, and company policies.
Reviewing this packet can be overwhelming. However, it also provides an excellent time for long-term financial planning ! So, dive in – your future self will be glad you did.
Most employers use group purchasing power to get benefits at a discount. This usually includes health, disability and life insurance but can also include club memberships, banking and more.
Get health insurance:
You need health and dental insurance, unless someone already provides that for you, so sign up.
If your spouse has insurance, then review your new plan to see if the benefits are better or the cost is less.
Life and Other Insurance
Most employers provide some amount of life and disability insurance. Again, take what’s free.
If you have others who depend on your earnings to survive, then you may need to enroll in additional group life and disability insurance, if offered. If there is no additional insurance or it is not sufficient, then you have other estate planning work to do!
Retirement – check for “free” money
Retirement may seem far off, but planning now will pay off because of the impact of compounding.
If your employer matches what you contribute, you really need to push to contribute so you get that match. How else can you get that kind of return on your money at the front end? (and if what I just wrote makes no sense to you, you really need to brush up on your Financial Literacy!)
As for investing, you can use the default investment option, but real long-term planning would be best. That is, pick a fund that is geared to your anticipated retirement age if you must, but doing your own asset allocation among funds by investment objective will work out better over time.
As with other cash management decisions, you don’t want to sacrifice too much today for your future; strike a balance between enrolling in payroll deductions and having enough in your paycheck to keep enjoying yourself now.
Other Benefits – continuing education
If you are offered continuing education, take the chance to improve your skills. This makes you more marketable for when you want to advance or change jobs.
Flex Spending and Credit Union
If you can sign up for an HSA account or other flex spending, do so to cover any uninsured medical bills that you could have during the year. You will need to revisit each year, so you do not contribute too much, leaving funds never used in the plan.
A credit union may provide benefits too, so check that out.
Related: How to Make Sense of Investing
So, what about your Student Loans?
Putting part of your paycheck into important benefits may mean less left to destroy those student loans in a matter of months the way some bloggers tell you they have done. However, debt management is only part of a total financial plan. You need benefits like health insurance and should contribute to retirement if your employer matches, so keep everything in balance!
Work on your Financial literacy
If you have questions on any of this post, then please check out our other posts and please let us know what is not clear!
Thanks, and good luck with your new job!