5 Things You Must Do When Your Paycheck Reaches $5K
Written by
Nicole Spector
Edited by
Molly Sullivan
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The average entry-level salary in the U.S. is $39,912 per year, or $19.19 per hour, as of April 2025. For full-time workers, that breaks down to $3,326 per month, or $1,663 per bimonthly paycheck. When you’re making this amount, the prospect of making more than double it — $10,000 a month, or $5,000 every other week — could feel like a dream.
Getting to the $5,000 per paycheck mark is a milestone; in many U.S. cities, it means you’ve graduated to the middle class. It’s cause for celebration, but also for financial action. Do the following when your paycheck reaches $5,000, or just increases, period.
Check Your Tax Bracket — It May Have Changed
A higher salary could mean falling into a different tax bracket, meaning your tax liability could go up.
“For example, the 2025 federal income tax brackets increase substantially when single filers pass $48,475 a year, and $96,950 if you’re married and filing jointly,” said Erika Kullberg, an attorney, personal finance expert and the founder of Erika.com. “If you are approaching a higher tax bracket, you can use pretax 401(k) contributions or other methods to stay in a lower bracket.”
Destroy Credit Card Debt Before It Destroys You
If, like most Americans, you’re carrying credit card debt, you need to make paying it off top priority. A boost in income should be seen as a clear opportunity to up the ante in tackling high-interest debt.
“As an employment litigation attorney and a witness to the damage debt and poor financial planning can do to even those with high incomes, my recommendation is: Pay off your credit card debt — in full,” said Seann Malloy, managing partner and founding attorney at Malloy Law Offices, LLC. “Keeping that balance, especially at a time when interest rates hover around or even over 20%, can devastate your finances quickly.”
Build Up Your Emergency Fund
An increase in pay doesn’t make you less vulnerable to unexpected costs. Take this opportunity to build up or replenish your emergency fund.
“You should have enough money saved up to cover at least three months’ worth of your current expenses,” said Chris Fohlin, founder and coach at Fohlin Financial Coaching. “Not having emergency funds puts you at risk of turning to credit cards or pulling from investments or retirement savings in a pinch, which leads to debt, penalties or lost growth opportunities. Calculate your necessary monthly living expenses and build up your emergency savings as quickly as possible so that you’re protected from the unexpected.”
Make Higher Contributions Toward Retirement
You may want to enjoy the income boost now, but if you want to be responsible and look out for your future, you should up your retirement contributions.
“When your paycheck increases, I recommend putting higher retirement contributions and savings on autopilot immediately,” Kullberg said.
Consider just how big a difference even a modest increase in retirement plan contributions can make.
“If you’re investing $500 a month in a Roth IRA with an annual return of 7% from age 30 to 60, you could have over $600,000 tax-free in retirement,” Malloy said.
Check Your Insurance Needs
Have you been putting off buying life insurance or disability insurance, or is it time to change your coverage. Now is the time to check your insurance needs.
“If your income is increasing, check your life and disability insurance policies to make sure coverage is still adequate, especially if you have dependents,” Kullberg said.
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