For some of you the upcoming fire season may be your first decent paying job. Maybe you’re fresh out of high school and this is your first real job, or you’re in college and this will be your summer gig. Either way, once those paychecks start coming in you’ll want to be in a position to make the right financial moves to set yourself up for the offseason and beyond. So without further ado, here’s the accounts you need to have, and why.
Key Takeaways
- 3 main accounts before you start the season
- Checking Account, High Yield Savings Account, TSP/Roth Account
Checking Account
Ok, so this one is pretty obvious. More than likely you already have one of these already set up and you’re thinking “yeah no sh*t.” However, just to make sure we’re covering all the bases I’m going to include the checking account in this list.
You’ll obviously need the checking account to receive your paychecks and any reimbursements (think per diem). One of the first things you do when joining an agency/company is to fill out a direct deposit form. Therefore I’d highly encourage you to have your bank account and routing numbers handy, maybe jotted down in the notes section of your phone, so you can easily access the data.
You can’t go wrong with one of the larger banks like Wells Fargo, Bank of America, or US Bank. These are great options because they are highly secure, provide savings and loan options, and have ATMs and branches all over the country if you need to go into a bank or have access to cash without paying withdrawal fees.
This account is also where, if you have a credit card or just opened up a credit card, you can start building some credit. If you’re new to using a credit cards and have no credit to speak of, fire season can be a great opportunity for you. One easy way to build your credit score is to put your per diem purchases on the credit card, and when you get your per diem check later on, use that to pay off the card, or just use your regular paycheck to pay off the monthly balance in full.
Obviously, if you are prone to running up debt, or you can’t make the whole monthly payment, I’d suggest avoiding the credit card and stick with the debit card. Theres nothing worse that starting out your financial journey with high interest consumer credit card debt.
High Yield Savings Account
This is the account where you’re going to start building up your savings. Don’t use the savings account that comes with the large banks, as those pay about .01% interest, basically worthless. Instead, I’d recommend setting up a High Yield Savings Account (HYSA). There are many options to choose from here, a couple examples are Marcus by Goldman Sachs, Public.com, SoFi, and American Express.
One thing to take into consideration is whether you can open up multiple savings accounts at the same bank, to create different savings “buckets.” Marcus by Goldman Sachs for example allows you to open up multile accounts, so you can have one account as your “Emergency Fund” and another as your “Trip to Greece Fund,” and any other expenses that you might be saving up for.
Emergency Fund
If you have no savings built up yet, this should be your priority as those paychecks start rolling in. The emergency fund is in place to keep you from having to use debt when life happens. For example, you blow the tires in your car, or your dog gets sick and needs to go to the vet, the emergency fund is there to cover it. The general advice is to have about 3-6 months of your expenses built up in your emergency fund, and since you may go months or even years without dipping into it, you want that money parked somewhere where it will be earning you something.
TSP/Roth Account
The third and final account you’ll want is your TSP and or Roth IRA account. This is the fun part where you get to start investing for your future. As a refresher, the TSP (Thrift Savings Plan) is basically the government’s version of the 401k. The Roth IRA is something you set up on your own, ideally through a low cost brokerage firm such as Vanguard, Charles Schwab, or Fidelity. The idea for these accounts is that you are investing your money and then letting the power of compound interest take effect over the following years and decades, leaving you with a nice retirement nest egg.
TSP Account
If this is your first year in fire and you’re a seasonal employee, you likely wont have access to a TSP account. If thats the case, feel free to skip this secion and read more on the Roth IRA below. However, if you do have a TSP account set up, make sure that you are contributing at least enough to get the match, which is 5%. The government usually defaults you to the 5% contribution. However, if you really want to get the ball rolling for your retirement, consider increasing you contribution to 15-20% to really set yourself up later in life.
One extra thing to note, the contribution limit for the Roth TSP is $23,000 per year. You probably won’t be maxing that out for some time, but it is something to be aware of.
Roth IRA
If you don’t have access to the TSP, don’t worry, you can still contribute to your retirement. Like I mentioned above, the Roth IRA is something you have to open and set up on your own. Vanguard, Charles Schwab, and Fidelity are great low cost brokerages where you can do just that.
While setting up your Roth IRA is more of a hands on process, it actually gives you many more options and flexibility than the TSP does. For instance, you can invest in individual companies, index funds, ETFs, and all sorts of other things that the TSP doesn’t have. You can set up automatic deductions from your paycheck to fund your IRA, or you can choose when to transfer money from your checking account to the Roth.
One very important thing to keep in mind: Once you fund the Roth IRA, make sure that the money is then INVESTED. Don’t just transfer the money over to the Roth and let it sit, make sure you are investing in things like the S&P 500, ETFs and index funds, etc. Unsure where to go? Just Google “Schwab S&P Index Fund” or “Vanguard low cost index funds.”
A final note on the Roth IRA, the current contribution limit for the year 2024 is $7000. They usually increase the contribution limit every couple years or so, so be sure to keep an eye on that.