This is the second post in a (semi-)regular series about getting started in the working world. It will be tailored to my personal experience, so some parts may not completely apply to your situation. I hope it will be a good intro for young professionals just entering the working world (or a refresher for those of us who've been through it for a few years!).
See the first post in the series- Retirement Accounts
While you're waiting for your first paycheck (with your 401k contribution already set up, of course!) you have a little bit of time to make sure you are financially set up for success. My two main suggestions here are to make sure you're tracking your money and have a place set aside for your savings.
Step 1: Track your Money
I've already written about my love for Mint.com so I won't go too deep into it here... but you need to know where your money is going each month and Mint can help you with that. Mint.com gives you the ability to link all your financial accounts (checking, savings, retirement, investments, loans, etc) to the site so that it automatically tracks each transaction in these accounts. You can also set budgets up within the site so that you are warned when you're getting close to your budget in a certain category.
I suggest taking a few minutes to set up a Mint account and get everything properly linked. Then log in every few days to ensure the system is categorizing your transactions properly. (ex. if you go to Target to buy groceries, it might put that transaction into the "shopping" category when really it should be "groceries"). After a month or two, you'll have a pretty good idea of how much you are spending!
Of course, if you prefer to do this in your own excel document or in another program, more power to you! Mint is what worked for me but I know where are many other ways to track your spending. Do whatever feels best to you.
Step 2: Set up a High Yield Savings Account
My choice of savings account started out as ING Direct (now called Capital One 360) but has since switched to Ally. ING was giving me something in the neighborhood of 0.75% Annual Percentage Yield (aka APY-- this is the rate the bank pays you for letting them hold your money) and then I stumbled across Ally's 0.95% APY and haven't looked back since.
I like these internet savings accounts because they give you (in my experience) a much higher APY than a traditional bank would. But whatever you can find that gives you the highest interest rate, go for it! The downside of online banks is that it can take 3-5 business days for your money to get transferred. So if you're ever in a situation where you need cash ASAP, this can be problematic*.
Take a few minutes to sign up for your preferred high yield savings account. So once you start saving in earnest, you'll have somewhere to put your stash! For now, this will be your primary savings location. Later in this series, we'll set up other investment accounts so you can get even more return on your money.
* To solve this dilemma, I keep about $500 in a savings account linked with my checking account. It pays me almost no interest but the peace of mind it provides is worth it. Having that $500 in easily accessible cash plus credit cards covers me for almost any issue that could arise where I would need money quicker than I could get it from my Ally account.
Check out the next post: Allotments!
How long did it take you to start tracking your spending? Do you have another suggestion for a high yield savings account?