How to Negotiate Your Starting Salary

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1. Negotiate Salary

It's tempting to jump at the first job offer you get out of sheer gratitude that someone thinks you're a grown-up. 56% of younger job-seekers feel pressured to accept offers outright.

But you will leave a ton of money on the table if you don't negotiate your starting salary.

"Always negotiate," said Claire Hunsaker, founder of the financial empowerment website askflossie.com.

"It's expected. Do it nicely, with data. Consider it an opportunity to show your employer you are professional, pleasant, and well-informed."

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2. Save for a Rainy Day

According to traditional wisdom, you should save enough money to cover living expenses for 3-6 months.

But given average living expenses ($5,253 per person), that means you need to squirrel away over $30,000. Who can do that on an entry-level salary?

"It's okay to adjust traditional wisdom to reality. Set low milestones for yourself," said Hunsaker. "Put away $50 a month. Even a $400 stash puts you well ahead of the game."

Saving for a rainy day is particularly crucial for women entering the workforce, according to Hunsaker.

"If you find yourself in an unsafe relationship, an unsafe work environment, or an unsafe housing situation, you want to buy yourself the flexibility to peace out."

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3. Take the Free Money

About 59% of American workers have access to a 401(k), but only 32% are using one to save for retirement. That's a big mistake — especially if your employer offers contribution matching.

"That's free money!" said financial advisor Samuel Napp.

What Is a 401(k)?

A 401(k) is an employer-sponsored retirement account that automatically deducts pre-tax savings from your paycheck.

Fifty-one percent of companies that offer a 401(k) also offer some kind of match, typically between 1-6%.

Try to hit your full employer match, and then increase contributions by 1-2% each year. "If you can't do that, contribute whatever you can spare," said Caishalynne Echols of Gen Y Planning.

If you start putting away $200 per month at age 25, then at the current average annual market return of 10%, you will have over $1.2 million when you retire, forty years later.

What Is an IRA?

An IRA is a pre-tax retirement account that isn't tied to your job. You'll want to set up an IRA if you don't have access to a 401(k).

What Is a Roth IRA?

A Roth IRA is a post-tax alternative to the traditional IRA.

Roth IRAs are popular for their flexibility. You can withdraw contributions tax-and-penalty-free at any time, and after five years you can also withdraw your earnings to buy your first home without facing additional costs.

Because you pay taxes on your contributions instead of your withdrawals, the Roth IRA makes the most sense if your retirement income is likely to be greater than your current income.

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"It's smart to contribute to a Roth IRA at the beginning of your career when you're in a low tax bracket, because it gives you a huge tax advantage when you take the money out."
—Caishalynne Echols, accredited financial planner

What Is a Roth 401(k)?

A Roth 401(k) is a post-tax account that combines the higher contribution limits of the 401(k) with some of the tax perks of a Roth IRA.

Most people who use a Roth 401(k) do so because they make too much money for a Roth IRA. If that's you, way to go!

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4. Focus Less on Your Student Debt — for Now

When student loans come knocking, paying them off can feel urgent. But depending on your debt, it might be better to invest that money.

Interest rates for federal student loans are between 2.75% and 5.30%. And all federal loans are temporarily paused, interest free, until September 2021.

Given that those rates are lower than a conservative annual market return of 6%, investing in the market instead of paying off your loans right away will probably give you a better long-term return.

"At the very least, don't stop contributing to your 401(k) because you want to pay off your debt," said Echols.

However, if your student debt is accruing interest at a rate faster than you can reasonably expect on returns from the market, attacking your debt first will save you money. This is likely to be the case if you have private student loans.

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5. Start Building Credit

Now is the time to start building the credit you'll need later to get a loan, a mortgage, a cell phone plan, or insurance. Credit can even be a factor when applying for jobs.

"The way our society is set up, you can't get ahead without good credit," said Echols.

How do you build up credit as a fresh graduate? It boils down to making consistent payments on purchases. This can include paying for things like your utility or cell phone bills, or even opening your own credit card. If you've never had one before, start small.

"Go to your credit union and get a card with a $500 limit. Use it for one kind of expense — say, gas. And get into the habit of paying it off in full, on time, every month," said Echols.

There are a million ways to optimize your financial situation, said Napp. "But if you do just a few of the big things right, you'll be in good shape."