You Shouldn’t Worry About Saving or Investing When You Get Your First Corporate Job
Here is what you must do
The time has finally come.
After weeks or months of job searching, you have finally found your first employer and are looking forward to your first monthly or bi-weekly salary.
Excellent. Congratulations.
So take out a loan, buy a car and go on vacation to the south of Portugal. Just kidding. Stop.
Saving up and investing in the stock market is out of the question. You shouldn’t worry about it yet.
This is where the biggest opportunity of your life is hidden.
Just because you can afford a lot now doesn’t mean that you have to pay for everything.
So before you go around like a madman paying everything and everyone, think about what you really want and need.
Because just supposing it would be bearable for you to simply continue with your previous life, how much could you save all at once?
Saving 80% would then theoretically be possible.
That is too extreme.
But it doesn’t have to be that.
If you treat yourself a little more than before, go on vacation more often, but live on little, you can still manage to save 50 or 60% without having to restrict yourself any further.
And for a very simple reason: your income will probably never increase as much as it does now.
Yes, all right, maybe a 5% increase, or maybe 8% if you are too good at your job.
The chance to change your life
With this comes the desire to one day live better: to have your own car, a bigger apartment, or simply to travel more often and eat better. And the ripped jeans could also be replaced.
You earn something extra with one or another part-time job. That’s how you make ends meet. And if necessary, there is only toast the last week of the month, with or without melted cheese.
Of course.
In this situation, saving and investing may still not be a good idea.
No matter how hard you try, you have the increase in rent and living expenses come first.
And that’s not a bad thing at all.
What should I do?
It’s best to calculate how much more you will have available each month before the first paycheck hits your account.
If your expenses increase as a result of the new job, for example, because you need to commute, need a car, or move to an expensive city, add the expected additional costs to your current cost of living.
The difference between future income and future cost of living is what matters.
But be aware that it is always easier later to reduce savings than to increase them.
How it continues
When saving too much at the beginning, you need to make a conscious decision to save less and first have the opportunity to clarify what you really want and need.
No matter what you decide, the cash reserve you automatically build up during this decision-making phase will help.
If it has to be your own house: OK.
And if other things have a higher priority for you, then you can give up a large part of the money you have saved over a long period of time and invest it in a riskier investment.
The good thing about starting a career is that the sudden increase in income allows you to achieve a high savings rate without much effort and without having to give anything up.
Once you reach a high standard of living, it is quite difficult to come down from it without feeling like giving up.