What I wish I'd done with my first real paycheck after graduating

By Venessa Wong

Plus: How to spot 'ghost jobs' that could be sabotaging your employment search

It's OK to have fun with your first paycheck, but it's important to have a plan for all the ones that come after.

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As graduation season kicks off, I've been thinking about what I got wrong when I started earning my first real paychecks.

Instead of putting those paychecks to work, I spent freely. I moved to China for three and a half years, taking full advantage of the local happy hours, dabbling in fine dining and even splitting the cost of a housekeeper with my roommate.

Of course, it's OK to have fun with those first paychecks, but it's important to have a plan for all the ones that come after. I had to accept that my student loans had to be repaid, and I needed to save more strategically. Cosplaying as a richer person than I actually was certainly had its highs, but it put me years behind on my financial journey.

Here's how you can avoid making the same mistake.

- Venessa Wong

Big money tip of the week: What to do with your first paycheck

Here's what I would tell myself if I were graduating and moving out on my own today: Before spending your first paycheck, map out where the money is going - allocating every dollar toward saving, investing, paying expenses and, yes, having fun.

Know your real take-home pay

In 2026, new grads will earn $64,000 to $82,000, on average, depending on their major, according to a survey of employers by the National Association of Colleges and Employers.

But after taxes and other deductions, you should expect to take home only 65% to 70% of your gross pay. That's the number to build your budget around.

Where should the money go?

Pay yourself first.

Here's a simple framework:

50%-60% for needs: These include housing, utilities, food, transportation and debt payments.

20% for saving and investing: Aim to put at least 10% toward retirement, if possible, along with additional money for emergency savings and long-term goals.

20%-30% for wants: This is what you can spend on dining out, travel, shopping - whatever floats your boat.

Automate everything

The easiest way to stay on track with your paycheck plan is to automate those allocations.

For saving and investing, go into your checking account and set up automatic transfers - as much as you can afford to save - into a high-yield savings account, so your money makes money (you can read more about HYSAs here). This savings account should house your emergency fund, which exists solely to cover unexpected emergencies so you don't rack up high-interest debt.

Once you have $2,000, reduce the automatic transfer by half (from 20% to 10%). Money will continue flowing into the savings account until it can cover six months' worth of living expenses in case you lose your job (getting to that amount will take a while). And then you can start investing the other 10%.

For retirement:

- Contribute about 10% of your income to a 401(k), if your company offers one.

- Choose a target-date fund, which automatically rebalances your portfolio to become more conservative as you approach retirement age.

- If your employer offers a Roth option, choose that, knowing you'll be paying taxes on contributions today in order to enjoy tax-free withdrawals later. (Roth accounts can be an incredible tool when you're young.)

I know these options aren't open to everyone, and in fact, my first job didn't offer a retirement plan. If you're in the same boat, do what I wish I'd done: Set up automatic deposits equal to 10% of your pay from your checking account to a Roth IRA, up to the limit.

But whether you have a 401(k) or an IRA, don't just set it and forget it. See if there's an option to automatically bump up your contributions by 1% each year.

Stay the course

These amounts may seem small, but if you stick with it over the course of your career, you'll end up with a sizable net worth thanks to the power of compound interest. Check out the chart below, which shows that investments of $95 a month beginning at age 20 can turn into $1 million by age 65, depending on how the markets perform.

It's always better to start by contributing as much as you can to your retirement account, says Samuel Molina, founder of the nonprofit Academy of Financial Education. You may need to decrease your contributions at some point, but if you start out by saving less, it will be harder to catch up.

My biggest regret is not starting to do all of these things shortly after graduating. Your 20s are an incredibly important time to save because of all the time your investments have to compound - that is, multiply. Trying to catch up later in life means needing to contribute a lot more money each month than if you had started in your 20s (see the above chart from Moneyguy.com). I would much rather invest $95 a month starting in my 20s in order to retire with $1 million than have to invest $340 per month to achieve the exact same outcome, just because I didn't start until age 30.

Join the next Don't Short Yourself Live Q&A

Kids are investing earlier than ever. Just ask 18-year-old Adam Erlichson, who started when he was 12. Adam - and his mom - can answer your questions about teen investing during our next Don't Short Yourself Live Q&A with MarketWatch's Venessa Wong - on Wednesday, May 6, at 1:30 p.m. Eastern time.

Job-hunting tip: Beware of 'ghost jobs'

Some job postings aren't real - or actively being filled. Companies may post these "ghost jobs" simply to collect resumes or as a way to signal growth.

Here's how to spot one:

- Be wary of posts that contain little information about the job and what it entails, or what qualifications the ideal candidate should have.

- Any job listing that's older than 30 days or that doesn't have a time stamp is probably a ghost job.

- If the job isn't listed on the company's career page, be suspicious.

If you want to know where the jobs really are - and how to stand out when applying - read this.

Key money reads

- Mortgage rates are falling, providing some relief to buyers who have been priced out by high interest rates.

- A MarketWatch reader wonders: Is it financially better to live in New York or San Francisco in 2026?

- If you're a luxury traveler, things are looking great for you right now.

Share your favorite money tip

Send us your favorite way to save money - or make your money work for you - and we'll share it with our readers. Send it to dontshortyourself@marketwatch.com.

-Venessa Wong

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

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