Your first paycheck can be quite exciting. However, before you open your pay envelope and look at the total, you need to have a plan in place to maximize your income and get the most mileage from your money. The advice below will help.

Your First Paycheck

That first paycheck represents real changes in your life. Whether this is your first job in high school or your first job as an “adult” after graduating from college, it is essential to make your money matter as much as possible by starting impeccable spending and saving habits from the very beginning.

The decisions you make with this and subsequent checks will have a direct impact on your attitude about money and your ability to manage it effectively. Keep these things in mind for your first paycheck, and every paycheck that follows.

Understanding Your Deductions and Taxes

While most people expect to see taxes taken from their checks, many are surprised by the sheer amount of withholdings from their checks for tax purposes. Initial tax withholdings include:

• Federal Income Tax
• Social Security Tax
• Medicare Tax

Some cities and states add their taxes into the mix for even higher withholdings. Depending on where you live, those additional taxes can feel painful coming out of your check before you ever see your money.

Do not forget to notice other withholdings from your paycheck such as 401K contributions, medical insurance fees, HSA (health savings account) deposits, and the like.

Once you understand how much of your check is left over after tax withholdings, you can build a better budget that takes your take-home income into account, allowing you to pay your bills each month and set aside some of your income for savings.

Budgeting

Budgeting is one of the most important things you can do once you are out on your own and making money. Learning to effectively budget allows you to live within your means without going into unnecessary or unwanted debt.

It also helps you understand your spending habits, where you can make changes, and sacrifices you may need to make to save an adequate amount of money each month.

The key to effective budgeting is to do all the following:

• Acknowledge the reality and limitations of your paycheck.
• Pay all your monthly bills.
• Set aside money for savings.
• Allow room for living along the way

When you create a budget that does all these things, it is easier to stick with your budget and helps you achieve your financial goals faster.

Automated Savings and Transfers

The more streamlined you make your efforts to save money, the better your efforts to do so will be. One of the best tools at your disposal is “automation.” That includes automated bill payments, as well as automated savings and money transfers into your savings.

When you automate the process, you do not have to think about it or remember to do it each month. More importantly, if you have the money set to leave your account as quickly as it enters, you also do not have an opportunity to spend it on something else before you “pay” your savings account each month.

There is a mental component to this as well. If you do not ever hold the money in your hand, it is harder to miss. By automating the process, the funds targeted for savings are not even around to tempt you before they are routed off to their intended destination.

Putting Everything Together for Easier Money Management

While your first paycheck is exciting, and most people want to rush out and enjoy the fruits of their hard work, the following advice can help that first paycheck keep on paying you long after the initial deposit has been made:

• Create an accurate budget for your income and lifestyle.
• Live within your budget.
• Think of items you are considering to purchase as a "want" or a "need".
• Automate savings and bill payments when possible.
• Create transfers that move money from your account, so you are not tempted to overspend.

These simple steps will help you build wealth even at a time when your paychecks feel so small.