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<p>Companies typically issue a paycheck on a weekly, bi-weekly or monthly basis, and at first glance, it can be tricky to decipher the amounts that are listed. (This <a href="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/tagged-LAM-Paycheck.pdf" data-link-source="tiny">anatomy of a paycheck</a> can help.)</p>
<p>Your gross pay is what you&rsquo;ve earned before any deductions (like taxes and insurance premiums) and your net pay is the amount you take home after all deductions. At minimum, you can expect some or all of these deductions to be withheld from your paycheck, as required by federal law, the state where you work, and depending on your individual situation. Remember, it's always best to consult a tax advisor.</p>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/web_GettyImages-901583062.jpg" alt="group of friends watching the sunset over a city skyline"></p>
<h2>Familiarize yourself with these definitions</h2>
<h3>Federal income tax</h3>
<p>Money that goes to the federal government to fund their programs and services (like Social Security and Medicare), and it&rsquo;s based on your earnings and information you provide on your W-4 form.</p>
<h3>State income tax</h3>
<p>Funds that some states collect to fund public services and programs like public schools and public safety departments.</p>
<h3>Local income tax</h3>
<p>Funds that some local governments collect to support community-specific needs.</p>
<h3>Social security tax</h3>
<p>Money that funds the Social Security program, providing retirement, disability and survivor benefits. It's usually deducted at a rate of 6.2% of your gross earnings up to a certain limit set by the IRS.</p>
<h3>Medicare tax</h3>
<p>Money that funds the Medicare program, providing healthcare benefits to people who are eligible. It's typically withheld at a rate of 1.45% of your gross earnings.</p>
<p>There may also be other pre-tax withholdings depending on your location or specific situation.&nbsp; Additionally, there are common post-tax withholdings, such as medical plans, to consider.</p>
<h2>Structure your&nbsp;spending and saving</h2>
<p>The best way to <a href="https://www.lifeandmoney.citi.com/lam/articles/money/finance-101/top_financial_tips_for_teens" target="_blank" rel="noopener" data-link-source="tiny">stretch your first salary as far as possible</a> is to create a realistic budget. Start by tracking your income and all your expenses for a month, categorizing them into essentials like rent, utilities, groceries and flexible spending, such as dining out and entertainment. This will give you a view of where your money is going and help you identify areas where you can cut back.</p>
<p>You&rsquo;ll want to allocate part of your income to fixed costs (like rent and insurance), savings and debt repayment, while also designating some amount for dining out or other leisure activities. Having a money plan like this can help you live within your means, avoid unnecessary debt and make informed financial decisions. Consider using a budgeting tool or app you trust to simplify the process and keep you on track.</p>
<h2>Take advantage of company benefits</h2>
<p>If your company offers employee perks that you&rsquo;re not using, it can be as though you&rsquo;re leaving money on the table. Pre-tax commuter cards, gym memberships, medical coverage and a 401(k) plan, for example, can all significantly boost your overall compensation, so it&rsquo;s important to be aware of your benefits and make sure you&rsquo;re utilizing them if you can.</p>
<p>Participating in a retirement plan like a 401(k), especially if your company offers matching contributions, is particularly key because the match essentially provides free money for your future. Many companies also offer tuition reimbursement, courses or training programs that can enhance your skills and career prospects, so taking advantage of those benefits now can boost your income in the future.</p>
<p>Healthcare benefits are a key part of many employment packages, offering access to medical care, prescription drugs and sometimes dental and vision care. When it comes to managing healthcare costs, you might encounter two common options: Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). Both accounts let you set aside pre-tax money to pay for qualified medical expenses, but there are some differences &ndash; check them out below.</p>
<p><img src="https://www.lifeandmoney.citi.com/rcs/v1/media/lifeandmoney/akpublic/storage/retrieveMediaFile/66c3a7c1cf85a6230bcbb0c2" alt="How to get the most out of your first salary.png"></p>
<h2>FSAs vs HSAs</h2>
<h3>Flexible Spending Account:</h3>
<ul>
<li>Employer owned</li>
<li>Eligible if employee offers</li>
<li>Lose money if you don't use it</li>
</ul>
<h3>Health Savings Account:</h3>
<ul>
<li>Employee owned</li>
<li>Eligible if you have high deductive insurance</li>
<li>Money stays in account if unused</li>
</ul>
<h3>Key Common Factors</h3>
<ul>
<li>Paycheck earned</li>
<li>Pre-tax contribution</li>
<li>Employer may contribute</li>
</ul>
<h4>Both can be used for services and products such as:</h4>
<ul>
<li>Co-pays</li>
<li>Deductibles</li>
<li>Rx</li>
<li>Physical therapy</li>
<li>Glasses and contacts</li>
<li>Orthodontics</li>
</ul>
<h2>Prioritize saving&nbsp;</h2>
<p>It can be tempting to spend more once you start earning regular paychecks, but keep in mind that the sooner you start saving, the more this money will grow over time.</p>
<p>A good first move is to build an emergency fund of at least three to six months income to give yourself a financial cushion in case you end up with unexpected expenses or lose your job. You don&rsquo;t have to set aside the full amount at once &ndash; you can grow it gradually, putting a little money away each time you get your paycheck. You can even automate this so the amount gets deposited directly into a savings account without your having to remember to do it.</p>
<p>Investing is another way to get more out of your salary. <a href="https://www.citi.com/banking/personal-banking-guide/savings/a-guide-to-high-yield-savings" target="_blank" rel="noopener" data-link-source="tiny">High-yield savings accounts</a>, for example, offer a higher interest rate compared to traditional savings accounts. This means your money grows faster over time because you earn more interest.</p>
<p>Alternatively, <a href="https://www.lifeandmoney.citi.com/lam/articles/money/savings/cd-ladder-strategy-for-high-interest-saving" target="_blank" rel="noopener" data-link-source="tiny">certificates of deposit (CDs)</a> allow you to deposit a certain amount of money with a bank for a fixed period, like 6 months, a year or even longer, and an early withdrawal penalty may apply if the money is taken out before the end of the time period. In return, the bank pays you a higher interest rate than that of a regular savings account.</p>
<p>Getting a head start on saving can not only help you build a safety net, but also set a foundation for reaching future financial goals, such as buying a home or traveling the world.</p>
<p>&nbsp;</p>
<p>&nbsp;</p>

Starting a new job is also a great time to set smart money habits so that you’re managing your expenses wisely and building up savings. These tips and strategies can help you maximize your first salary and take control of your finances. 

How to Get the Most Out of Your First Salary

<p>Every young professional wants financial security in life, and to know their money can provide them with the things that bring them joy. Getting to that point doesn't have to entail endless spreadsheets and intensive budgeting plans, but it can call for some strategic, life stage-specific thinking, according to pros.</p><p>"Financial wellness has to mean different things at different ages," says Robert Pagliarini, president of Pacifica Wealth Advisors in Irvine, CA, and author of "Get Money Smart: Simple Lessons to Kickstart Your Financial Confidence & Grow Your Wealth."</p><p>Pagliarini looks at it as a "path and plan for the future," explaining that actively taking steps to reach it "is what wellness is about." The key, especially when you're just starting out, is to find a way to balance your planning for the future with living in the moment, he says. These expert tips can help.</p><img src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/defining-financial-wellness_body-2_974020662.jpg" alt="A woman reviews her finances on a laptop in a coffee shop" class="right_image" /><h2>Examine your money habits</h2><p>A good first step is to educate yourself on the <a href="https://www.lifeandmoney.citi.com/lam/articles/money/finance-101/credit-101">fundamentals of personal finance</a>, and then learn exactly where your money is going by mastering your cash flow, says Douglas Boneparth, president of Bone Fide Wealth in New York, NY, and co-author of "The Millennial Money Fix."</p><p>"Shooting from the hip is reactive," says Boneparth. "You always want to be proactive. If you're organized, you may find opportunities to refinance your loans, or be able to restructure your payment plan," he says. "Then you'll spend less time worrying about debt, and maybe you'll have more time to think about increasing your income."</p><img src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/defining-financial-wellness_body-1_1415389245.jpg" alt="A woman buying groceries removes money from her wallet" class="right_image" /><h2>Invest your time</h2><p>Young adulthood is a critical stage to be investing in ways that don't immediately add to the bottom line, says Pagliarini. "Most twenty-somethings feel they're totally broke because they're financially broke," he says, "but I view wealth in a different way. Wealth isn't just stocks and bonds. What they have going for them is time. And time is probably the most valuable asset any of us will ever have."</p><p>If you use that time to improve yourself — to become more confident, to network, to develop more skills, to build what he calls "human capital" — your investment will pay off financially down the line, says Pagliarini.</p><p>Take Brooklyn-based entrepreneur Ben Brown, for example, who started his own enterprise, the Association for Young Americans, while working full-time at a consulting firm in his 20s. "I was working in a demanding job, traveling quite a bit, and then was trying to start and build a company at night in my hotel and on the weekends back home," says Brown. He made a host of financial sacrifices, such as taking a pay cut and funding the first year of the business with his own earnings, but he views them positively, as investments in his own future. "My financial goals are similar to other young entrepreneurs," says Brown. "I want to be comfortable, but I'm willing to forego some of that now to get it in the future."</p><p>With a vision and a plan in place, a crucial shift takes place: Suddenly you'll find that saving money doesn't become a game of depriving yourself of what you want, but rather one of allocating money to where you want it to go.</p><p>That said, you can still <a href="https://www.lifeandmoney.citi.com/lam/articles/money/family/personal-financial-planning-for-families">start saving for your future</a> even if you don't yet have a clear picture of what you want from the rest of your life, Pagliarini notes, because the simple act of saving can be transformative psychologically. It just takes a "start small" mindset. "If you go from someone who doesn't save to someone who saves a dollar a day, you've changed your identity," and that can bolster your financial wellness. It's not about the amount, but rather about "changing who you think you are," he says "That's much more significant."</p><p> </p><p><em>— With additional reporting from Life and Money by Citi editors.</em></p>

What Can Financial Wellness Look Like in Your 20s and 30s?

<p>Being under one roof with other people isn't just about agreeing on paint colors or how to arrange the living room furniture.</p><p>It also means finding equitable ways to share expenses that all can agree on. And, just as there are all types of living arrangements, there's also a variety of financial approaches that offer a sense that everyone is contributing fairly to the upkeep of the household. The common theme to maintaining a happy home? An open conversation.</p><p>Judith Lu, founder of Blue Zone Wealth Advisors, tells her clients to have a transparent and honest conversation before entering into any living situation. "Lay out ground rules, like a prenup, so you don't have to fight about it later," Lu says.</p><p>Nesting with your significant other? Sharing a place with friends? Living at home with family members? Take a tip from a range of roommates who found smart ways to broach the who-pays-what subject and fairly divvy up the expenses.</p><h2>The proportional method</h2><p>When New York City-based David Kowarsky and his girlfriend moved in together, he was earning roughly 40% more than her. Given the difference, they agreed to split major expenses according to income. For example, when it came to writing their $2,400 rent check, he paid $1,400 while she contributed $1,000.</p><p>Their budgeting approach is known as the proportional method, which takes into account different income levels. The question of how to split expenses equitably came up before the two moved in together. Moving in together meant that Kowarsky's girlfriend, in graduate school at the time, would pass on the affordable graduate housing offered as part of her program. Kowarsky wanted to make living together an "easy decision," he says, and given the differing income levels, they both felt this proportional method was fair.</p><img src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/Citi-Shared-Spaces-02_web.jpg" alt="Illustration depicting "The Proportional Method" which is popular among couples with varying incomes where the higher-earning partner covers more of certain expenses. There is lightbulb that represents utilities, a modern high-rise that represents rent paid and a reusable grocery tote that represents money spent on food. For the hypothetical couples, utilities and housing are split on a 40%/60% ratio, while grocery expenses are shared by the couple taking turns making dinner." class="hero_listicle" /><p>"It was relatively informal, but not too far from the proportional split," Kowarsky says. As for other shared expenses, they both pitched in about $200 a month toward utilities and household items. If there was any left over in the fund, they would use it together, such as for an at-home date night. When the couple bought bigger ticket items such as furniture, Kowarsky purchased the higher priced item while his girlfriend bought a piece more in line with her budget.</p><p>To help manage shared expenses, Lu suggests pooling money in a shared bank account. Everyone can still retain their own bank account, but a shared account helps to keep things transparent and minimizes potential conflict about who paid what.</p><p>Lu points out that when things are going well, there is no conflict, but she says, "if there's a fight, someone might say 'I make it possible for us to live here' or 'I paid for the cable bill.' Or maybe someone owes utilities or groceries." To that end, Lu advises that clear rules and transparency about the budget can help make bill-related conversations more straightforward and less emotionally charged.</p><h2>The multiple split method</h2><p>Another way to split expenses is to vary costs depending on use. Just as a bigger hotel room commands a higher price, a roommate with a larger room or an ensuite bathroom might pay more, hence the multiple split method.</p><p>When Vandana Apte moved in with three friends in New York after college, the four split the rent evenly, even though the bedrooms differed in size. When two of the friends moved out, Apte and the remaining roommate decided to adjust how rent was split based on the room size. They turned to a multiple split method, which in their case was more of a 27/25/24/24 split.</p><p>With total rent at $3,240, the person with the biggest room, and the most natural light, now pays $860 a month, the second largest room with windows is $810, and the two smaller basement rooms are $785 each. Apte and her roommate thought this split was "more fair" and they were transparent with new roommates about how the total rent would be divided.</p><img src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/Citi-Shared-Spaces-01_web_0.jpg" alt="Illustration depicting "The Multiple Split Method" which is popular among roommates, where common expenses are divided based on use. There is lightbulb that represents utilities, a townhouse that represents rent paid and a grocery delivery service that represents money spent on food. Hypothetical roommate split costs based on who uses more electricity and who has the bigger bedroom with amenities. Groceries are paid for individually." class="hero_listicle" /><p>Marilyn Wechter, a psychotherapist and financial therapist in St. Louis, MO, says this arrangement is fair so long as the terms are clear and agreed upon first, noting that typically, whoever holds the lease gets to set the rules. "The important thing is to be really clear. Set what the expectation is," Wechter says.</p><p>Other expenses were split evenly because "the size of the room has no bearing on how much electricity, gas or WiFi we each use," Apte explains. And, with four roommates, keeping the place clean is a priority for all. To save on hiring a cleaning person, they set up a monthly deep cleaning session during which everyone pitches in. "We all help clean pretty evenly" regardless of what someone is putting toward expenses, Apte says.</p><p>As for keeping track of who-paid-what (especially with multiple roommates) Lu suggests using expense-splitting apps to stay on top of expenses. Automating payments can also help ease the burden of someone needing to be in charge of monitoring monthly bills or rent.</p><h2>The grab bag method</h2><p>As the name suggests, the grab bag method adjusts to suit the circumstances.</p><p>Christian Garduno of Littleton, CO, lowered his monthly rent by moving out of his one-bedroom apartment and moving in with his father to share expenses. The arrangement was beneficial for both of them. Garduno's lease was up and he wanted to save up for his next move. Turns out that his father was also looking to cut back on expenses.</p><img src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/Citi-Shared-Spaces-03_web.jpg" alt="Illustration depicting "The Grab Bag Method" which is popular among young professions living in their childhood homes who kick in for some household expenses. There is lightbulb that represents utilities, a house that represents rent paid and a brown grocery bag that represents money spent on food. A hypothetical father and son split the costs in different ways depending on who uses more Wi-Fi, how many household tasks the son does and who buys the groceries and who does the cooking." class="hero_listicle" /><p>When the two first started talking about how to share costs, his father suggested a 50/50 split. But Garduno knocked off $80 a month by offering to help his dad with certain tasks. As part of the agreement, Garduno washes his father's car and spends time helping him with budgeting and improving his credit score.</p><p>When tasks get thrown into the cost sharing calculation, things can get tricky. For instance, adult children who move in with elderly parents to act as caregivers may not be thinking about money, but the issue will come up. Wechler advises that all parties define expectations clearly and make it a point to check in as needs or tasks shift. "It can't just be 'I'll do a little work' in exchange for paying less," she says. Sit down and define a concrete number for what "paying less" means along with the details of any contributions of time and labor.</p><h2>Talking it out</h2><p>There are many ways to split the shared costs, but there's only one way to make it fair: By talking about it ahead of time and coming to an agreement. By the same token, if one or more roommates' financial situation happens to change, that may call for a reassessment of the cost-splitting approach the household has adopted. </p><p>Discussing money can be difficult, but Wechler advises acknowledging that right off the bat. "You can say, 'this is really awkward for me but I want to try to put things on the table,'" she says. Then, stay focused on what you want to talk about, and if the conversation starts veering into other areas, like feelings, try steering it back toward the financial details.</p><p>Keeping the lines of communication open will make for a happier budget — and a happier home life, too.</p>

3 Ways Roommates Can Share Living Costs Equitably

<p>A budget can give you a clear path to live within your means and reach your money goals &mdash; and while it's a straightforward concept, there are some strategic steps you can take to set one up (and keep at it.)</p>
<p>Many people think of budgeting as setting limits on your spending, but it's more helpful to think of a budget as a map with clear directions detailing how you can reach your financial destination. "Budgeting gives you the freedom to say 'yes' to things that matter and 'no' to things that don't help you reach your goals," says Whitney Hansen, a money coach based in Boise, ID. "Most people view budgets as restrictive, but they are actually empowering."</p>
<p>Learning to live within a budget can require a little shift in thinking because "by saying yes to something you are saying no to something else," she acknowledges. But instead of focusing on all the things you can't buy, it's better to focus on what you are saying yes to, Hansen suggests." By getting your finances in order, you are saying yes to financial security, peace of mind and things that are directly in line with your values," she says. "Sometimes we just have to remind ourselves of that."</p>
<h2>Map out the numbers</h2>
<p>The first step in creating a realistic budget is having a clear picture of your income and how you spend it. A spreadsheet (digital or analog) is a handy tool for accomplishing this. First, add up your monthly take-home income from all your sources &mdash; regular salary, freelance, side hustle or some combination &mdash; and calculate your monthly average.</p>
<p>Once you know what income you have to draw from, you can start to track your spending. Use a pen and paper (get creative with a&nbsp;<a href="file:///Z:/lifeandmoney.citi.com/money/productivity/bullet-journal-financial-planning.html" target="_blank" rel="noopener" data-link-source="tiny">bullet journal</a>) or a site or an app you trust to sort your spending into &ldquo;buckets&rdquo; such as mortgage or rent, utilities, car payment, internet, insurance, food, gas, entertainment and so on. Breaking down your spending into categories can help you figure out where you may be able to cut back.</p>
<p>To identify spending trends, you may want to try this exercise, Hansen suggests: Print the last 30 days of transactions from all your accounts. Write down three categories in which you either overspend or aren&rsquo;t sure how much you spend, such as &ldquo;eating out&rdquo; or &ldquo;online subscriptions&rdquo;. Choose a highlighter in a different color for each of these three categories and then go through every transaction highlighting those that apply and adding up the totals in each group.</p>
<p>&ldquo;This is incredibly eye-opening,&rdquo; Hansen says, because it allows you to see if there is a service you can cancel, for example, or any charges you&rsquo;ve forgotten that you have been paying. If you&rsquo;re struggling to figure out where you can cut spending, says Chicago-based money coach Tim Jordan, try asking yourself questions such as &ldquo;How much time will I spend on this?&rdquo; and &ldquo;How much fun do I have doing this?&rdquo; &ldquo;If the answer is &lsquo;meh,&rsquo; it&rsquo;s probably fine to stop spending money on it,&rdquo; Jordan says.</p>
<blockquote>
<p>Budgeting gives you the freedom to say "yes" to things that matter and "no" to things that don&rsquo;t.</p>
</blockquote>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/web_GettyImages-913245664.jpg" alt="young girl dividing coins into 3 different jars. From left to right, one jar is labeled " /></p>
<h2>Define your goals</h2>
<p>Once you've determined what you truly can spend on, it's a good time to consider both your short-term and long-term goals. Short-term goals &mdash; buying a new car or paying off credit card debt &mdash; might be something you hope to achieve within the next year or so. Long-term goals stretch further into the future: saving for a home, college tuition or a retirement fund, for instance. It helps to do some research to estimate how much you'll need for each of these goals and to plot out a timeline if that applies.</p>
<p>Here's one example: After doing their homework on a long-term goal of buying a home so they could settle down and stop spending money on rent, New Jersey mother of two Alyssa Wolfe and her husband learned that if they saved enough to put a full 20% down payment on a house, they could get a more favorable mortgage rate. It took them five years, but they achieved their goal of saving for this payment by taking only family-related vacations, eating out less, cutting cable service and selling items they no longer needed. To stay motivated while in savings mode, Alyssa's husband had a side hustle of buying designer suits at thrift shops and re-selling them online. Those profits even helped them create a "fun money" fund for date nights and purchases beyond their everyday budget.</p>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/create-a-budget_body-2_1340636182.jpg" alt="A couple creates a budget on their laptop" /></p>
<h2>Stay open to adjustments</h2>
<p>When you have a budget, you won't want to just set it and forget it; it's helpful to check in regularly to see if you need to recalibrate. That might mean monitoring your spending once a month and making small updates as needed. If you notice the cost of something (like a streaming subscription) changes, for example, you can ask yourself if it's something you can do without or, if it's still worth having, if there's somewhere else you can cut back. You might also want to do a more significant evaluation every year to address any bigger changes.</p>
<p>Sticking to a budget can help you better understand the tradeoffs you might need to make to meet a goal, and it can also help you clarify how much that goal really means to you. And while creating one does take some work, the upside makes it worthwhile. A budget can help you establish a mindset and good habits that put you in charge of your money and on the path to smarter, more values-driven spending.</p>
<p><em>&mdash; With additional reporting from Life and Money by Citi editors.</em></p>