Excited about getting your first “real world” paycheck? Before you mentally start spending it, consider these four key money matters:

1. Your paycheck may be less than you expect. No matter how much you earn, your net pay (the amount you receive after all withholdings and deductions) will be less than your stated salary. In some cases, it may be quite a bit less. According to the Tax Foundation, the average single, childless U.S. worker pays about 22.4 percent of salary in income and payroll taxes.* That means a $30,000 salary amounts to just over $23,000 in take-home pay every year.

Your paycheck likely will be reduced by:

  • FICA (Social Security and Medicare taxes)
  • federal, state and local income taxes
  • health insurance premiums
  • voluntary contributions to a retirement plan, such as a 401(k), 403(b), 457 or Thrift Savings Plan (TSP)

Depending on your state, employer and job, there may be other required and voluntary deductions. So plan your budget around your net pay, not your gross pay.

2. You need to prioritize your spending. Set up a budget listing expenses, such as rent, food, transportation, insurance, student loan payments, and credit card and auto loan payments, as well as savings (yes, savings should be a priority). Subtract from your net pay to find out how much you can spend on discretionary items, such as travel and fun. For more tips, read Creating a Budget.

3. Insurance is a must. If you don’t get health insurance through your employer, look at other options such as healthcare.gov or your state’s health insurance exchange. If you have a health emergency, having health insurance is not only crucial to protect your finances, but it’s also required by law. If you don’t have health insurance, you may have to pay a tax penalty each year.

Other insurance to consider:

  • Renters or homeowners insurance to protect your property from theft or damage
  • Sufficient auto insurance. You may want to buy Guaranteed Asset Protection (GAP) insurance if you have an auto loan balance greater than the amount of your collision or comprehensive coverage.
  • Life insurance (maybe). Unless you have dependents, you may not need life insurance at this point in life. However, talk to an insurance agent about your situation.

Read more about insurance offerings from Navy Federal Credit Union.

4. Retirement is closer than you think (really). It may seem silly to think about something that is decades away, but now is the ideal time to start saving for your future. The longer you have to save, the more the power of compound earnings can work for you (read How to Retire a Millionaire). If you don’t have a retirement plan at work, or if you’d like to supplement it with personal retirement savings, consider opening an Individual Retirement Account. Visit the Navy Federal Retirement Center to learn more.

Start with a Good Foundation

Learning about money is an important stepping stone to financial security. The more you know, the better prepared you’ll be for the future and any financial challenges and opportunities it may bring.

*Source: The Tax Foundation, taxfoundation.org.