Landing your first healthcare job is a significant milestone. After years of classes, clinicals, exams, long shifts and looking for the right job that fits your schedule and financial needs, you’re now earning a paycheck for the work you’ve trained for. But the first year working in healthcare, or any job, is more than just learning your new job and getting comfortable in your industry. One thing to remember: earning a paycheck means there are financial decisions to make.
When you start a new job, you need to consider things like health insurance, retirement plans, and other employee benefits. And, every year, you’ll need to file taxes. So having the information you need about your income and accessing it come tax season is important.
While you don’t have to have your financial future all figured out on day one, understanding a few key financial basics can help you feel more confident and make informed decisions as you begin your career.
Understanding pay stubs
One important thing to remember about pay is that there are two types: gross pay and net pay, also known as take-home pay. Gross pay is what you earn before any deductions are taken. Net pay is what you keep after deductions are taken out.
Between taxes, insurance premiums, retirement contributions, and other deductions, the amount deposited into your bank account will be lower than your salary or hourly rate multiplied by the hours you worked.
Once you get your first paycheck deposited into your bank account, you’ll want to check your pay stub. Your pay stub will come with every paycheck. It’s the official record of how much time you worked, how much you made, and how much you paid in taxes and benefits. It will show:
- Withholding. This means all federal and state income taxes (where applicable) as well as Social Security and Medicare Taxes.
- Health insurance deductions. Depending on the type of plan your employer offers and the type of plan you chose, your medical benefits are deducted directly from your paycheck.
- Retirement plan contributions. If you’re eligible to contribute to your company’s 401 (k), another name for a retirement savings plan, this will be listed on your pay stub.
- Shift differentials/overtime pay (if there is any). If there’s a shift differential, your pay stub will show extra pay for working certain shifts. A shift differential depends on the time of day and shift times you work. For overtime, it depends on how many hours you worked. Overtime pay depends on state and federal laws, and these would appear separately on your paycheck.
- Vacation/Paid time off accruals. If you took vacation, it will show as vacation pay, or PTO, on your paycheck. Some pay stubs also show how much time you accrued toward vacation.
Understanding how to read your pay stub makes it easier to verify your earnings and recognize how different shifts or overtime hours affect your paycheck.
Benefits enrollment
Benefits are an important part of your total compensation. When you start a new job, you’ll have approximately 30 days to sign up for benefits, depending on the company. Missing the enrollment window usually means you’ll have to wait a specific amount of time before you have the option to sign up again, depending on your job type and company.
During the onboarding process at your job, you’ll receive information about benefits options. If you’re unsure about certain terms, this is a guide to what everything means. Not all options listed will be available; it depends on the company you’re working for:
- Medical, dental, and vision insurance
- Retirement savings plans
- Life insurance
- Disability coverage
- Flexible spending or health savings accounts
- Employee assistance programs
- Tuition reimbursement
- Continuing education benefits
Every employer structures benefits differently, so it’s worth reviewing your options carefully and asking questions if something isn’t clear. Human resources teams expect new employees to have questions, especially during open enrollment or onboarding. One note on health, dental, and vision insurance if it’s your first time signing up for them: premiums are the amount taken from your paycheck to keep you enrolled in the plan and covered. The deductible is what you pay until your insurance kicks in. So when you’re reviewing plan options, note the premium and deductible amounts.
Build good financial habits
Starting your career means building good financial habits that can make a big impact over time. This is the time to start looking at your expenses, everyday spending and incorporating a few habits that will help you save (both for your future and an emergency fund in case of a big life event or layoff).
For a long time, the golden rule in savings is to put a minimum of 20% of your paycheck (after taxes) into savings. But some experts say 10% is the minimum, depending on your other expenses and long-term goals. The exact number will be up to you but make sure you’re factoring in all your expenses accurately. Look beyond rent or mortgage, bills, food and student loan payments if you have them. Don’t forget the little things that add up: subscriptions, pet care, gifts and holidays, banking fees, etc.
Simple ways to start saving are with micro-investing apps like Acorns, Stash, or Betterment. These easy-to-use apps round up everyday purchases to the nearest dollar and invest the spare change. You can build your savings over time without making large upfront contributions.
Other ways to build a strong financial foundation are:
- Track your monthly income and expenses. Simply knowing where your money is going is important.
- Set aside money for unexpected expenses. Keep money aside in an account that’s only for emergencies, like a health issue, accident, loss of a job, etc. Make sure you have enough money to cover rent and expenses for at least six months.
- Review recurring subscriptions. Cancel what you don’t need or use. Little amounts, even $20 or less, add up over time.
Update your budget when work or lifestyle changes happen. The financial plan you have for yourself today might need to change as your lifestyle changes. For example, you should modify your budget when work hours get reduced, or you take on per diem shifts.
The bottom line is you don’t need a complicated system, and it doesn’t have to be rigid. Even simple habits can help you stay organized and aware of where your money is going and your plan can change when you need financial flexibility.
Michelle McAfee