3 Ways to Make the Most of Your First Real Salary

When you get your first "real" job and start making a proper salary, you get to decide what to do with all of that money that's coming in. Unfortunately, if you don't make a conscious plan for how to save and spend it, chances are good your money won't go as far as you think it will and you'll end up spending it in suboptimal ways.

If you want to make the most of the money now being deposited into your bank account each payday, here are a few steps you need to take.

1. Pay yourself first

One of the first and most important things you should do when you start making good money at your first real job is to arrange to pay yourself first. Essentially, this means you treat saving for your future as you would any other must-pay bill like your rent. Saving isn't an afterthought, but is instead a priority.

One way to make this happen is to arrange to have money transferred out of your checking account on payday into various savings accounts and retirement plans. For example, you could have some money put into an emergency fund, some into a down payment fund, and some into a retirement plan.

When you're young, you have the power of time on your side, so even saving a small amount now could make a big difference later in your life thanks to compound interest. Investing just $150 a month from age 25 to age 65 could leave you with close to $800,000 in retirement funds, assuming you earned a 10% average annual return.

Establish the habit of paying yourself first now so you get used to saving before you spend.

2. Make and live on a budget so you can spend the money on things you value

The next big thing you need to do is to make a budget. This probably doesn't sound fun, but, here's the reality: You're going to spend money on things, so you may as well make sure you're spending it in a way that brings you the most joy. Budgeting enables you to do that.

When you make a budget, you can make conscious choices about where your money goes. Say you really want to travel. You can make that a priority in your budget so you can ensure you're devoting a good amount of your income to funding vacations and make the conscious choice to cut back in other areas.

This is a way better way to make the most of your money than just spending mindlessly on dining out or buying clothes or taking Ubers instead of public transportation and then getting to the end of the month and realizing you don't have any money to go on that weekend trip.

3. Avoid committing your hard-earned money to creditors

Finally, aim to avoid committing your money to creditors so you can actually make the most of your salary. Limit your credit card charges to the amount you can pay back each month. And don't borrow for anything you don't absolutely need (like a vehicle to get you to work).

If you take these three steps, you can make the most of your income from your first real job and set yourself up to effectively manage your money as your salary grows over time.