JANUARY 2006 :: COVER STORY : CONSUMER ED

Your First Real Job
Get Ready for Big Expenses and Big Decisions

By Karen Blumenthal
Staff Reporter of The Wall Street Journal

After all the time you spend hunting for and interviewing for your first real job, the first week looms as both exciting and terrifying. There are names to remember, new duties to learn and important details to figure out-like where to eat lunch.

As you make the transition from school to work, there will also be some real financial costs for you to shoulder. And in that mountain of paperwork that you fill out, there will be major decisions to make, some of which could have a surprisingly long-term impact on your future wealth.

To avoid ending up short of funds or in debt, it helps to know what may be ahead. Here are some tips and issues to consider:

CLOSET ISSUES: Chances are, the clothes you wore to class won't work as well at work. You'll need to arrive with nice "business casual" clothes or suits-or both. When my husband started out, he couldn't afford to pay cash for the suits needed for his first journalism job, so he signed up for a department-store credit card. It took us more than a year to pay it off-not because he bought expensive clothes, but because our budget was so tight.

At the same time, one nice outfit won't cut it. My friend Carlos was assigned to interview computer magnate Michael Dell in his first few months on the job. Just before the big day, Carlos's only pair of dress pants was stolen from his apartment laundry room. Clueless about fashion, a friend directed him to the high-end retailer Barneys New York, where the cheapest pair of pants cost $239, about a week's pay. He didn't have much choice-or a credit card-and the purchase emptied about half his bank account at the time. Owning a couple of pairs of slacks would have saved him a lot of money-and ribbing from his colleagues.

Consider upgrading your closet in the year before you go to work and asking for work clothes instead of play clothes for birthday and holiday gifts.

PREPARE TO PAY YOUR OWN WAY: Unless you plan to become an investment banker or a professional athlete, you aren't likely to land a signing bonus that could cover the deposit on your new apartment or buy your new car. Instead, you'll have to pay your own moving costs and figure out your transportation.

Cities that seem like neat places to live can be very costly. A college graduate today may start out at $35,000 to $45,000 a year, and "that sounds like a lot of money," says Kerin Borland, senior associate director of the University of Michigan Career Center. "But if you're going to a city that has a high -cost of living, you can find yourself near the poverty level."

Using the salary calculator at www.homefair.com, you can compare the cost of various cities. If you choose to rent in Manhattan, for instance, you would need to earn about $55,000 to have the same standard of living as $40,000 would buy you in Dallas.

You also need to account for transportation costs. If you need a car, you may have to pay a monthly bill for parking. And even public transportation fares add up when you're traveling twice a day, five days a week.

THE FAR-AWAY PAYDAY: Have some extra cash available. Depending on when you start your job and whether your employer pays weekly, biweekly or monthly, you might not see the first real paycheck for two or three weeks. That can feel like forever when you already have bills to pay.

FORMS, FORMS, FORMS: Even if you're joining a small or medium-size company, you'll have a stack of paperwork to conquer during that first week. You'll need to fill out a W-4 form to let your employer know how much to withhold for your future federal income taxes, and probably a state form as well.

Most companies offer health insurance and may let you choose among plans that vary in cost, coverage and choice of health-care providers. If you know your choices and the costs in advance, you can discuss them with your parents, already-employed friends or some of your new co-workers. Kathy Sims, director of the University of California-Los Angeles Career Center, says that recent graduates in particular can be great resources.

The Society for Human Resource Management says that coverage at most companies begins on the first of the month after you are hired. But at some companies, you may wait one or two months or more for health coverage; in that case, you'll want to extend your student coverage until the company coverage kicks in.

NO TIME OFF: If you have an important family event in the first few months after you start your new job, work it out with your employer up front. At most companies, you need to work at least two or three months before you are entitled to paid sick days or vacation days. At some companies, you may have to work a full year to be entitled to a paid vacation.

RETIREMENT, ALREADY? Most companies will offer you the chance to contribute to a 401(k), which is a fund for your retirement savings. In addition, most companies will match part of your contribution. It may seem absurd to think of retiring on your first week of "real life," but the money you (and the company) put away today has many, many years to grow and can pay you back handsomely later. Even if your budget is tight, you should try to sock some money away-at least enough to take advantage of the company match.

Ms. Sims says she cashed out her retirement money from her first job-and she regrets it. Now 52 years old, she estimates those funds might have grown to $50,000 today if she had worked at the company just a little longer and left her savings alone. "I was careless about the decisions I was making with my benefits," she says.