How to manage your first salary.
March 29, 2022
When you earn your first paycheck, it’s a moment you’ll never forget. The feeling and emotions are too high when you receive a notification of salary credited to the bank account. And as you receive salary the desire to spend money on buying some goodies or celebration is also high. After all, you’re no longer dependent on your parents’ allowance. Saving early in your job can help you become a more successful investor in the long term, even if you splurge now and then. However, a goal-based financial plan is essential in this case, and every young professional must not ignore it.
Let me ask you a straightforward question “Do you have enough money saved up in your account?”
In general, many of you would reply as “No.” A savings account is merely a bank account in which money is saved, but no action is ever taken. When you start making long-term investments with a percentage of your income, only then does it mean you’re investing.
As a starting point, save 20% of your gross monthly earnings.
When your age reaches 60, if you start a SIP (systematic investment plan) at the age of 23, you’ll have Rs 82.75 lakh in an equity fund if you invest Rs 1,000 each month in an equity fund (assuming 12 percent annual returns). While if you delay saving for seven years and start investing at the age of 30, you would only collect Rs 35.30 lakh. ‘Rs 47.45 lakh is the amount of money you might lose if you don’t take action (Rs 47.45 million). It is always good to consider the best alternatives you could have done with your money. You can expect the best returns as you invest in a mutual fund app.
Make a budget and stick to it.
Build a budget to discover how much money you spend on needs and luxuries each month. It is always good to save more money when you have an established financial plan. And the right way to do this is to start by writing down your monthly expenses. This simple step will help you determine how much money you have available to invest and save.
Recurring or term deposits from your bank might help you build an emergency fund. In this case, your bank will make monthly withdrawals from your account, and at the end of a specific period, they will return the money to your account with interest accrued. Make sure that you save money each month to build up a rainy day fund if you ever find yourself in need.
It’s a good idea to invest via a Systematic Investment Plan (SIP)
A well-balanced investment portfolio might include a variety of instruments, such as mutual funds, stocks, bonds, and debentures. With less responsibility and fewer dependents, you have a higher tolerance for danger than most individuals your age. Nothing can be An excellent way to get your feet wet in the market is using a Systematic Investment Plan (SIP).
Insurance is a need.
One should purchase accident and disability insurance in addition to medical insurance. If you don’t have any obligations or dependents, getting health insurance should be your priority. You can choose the mutual funds app for such investments.
Right now, cryptocurrencies are all the rage.
To be sure, the popularity of cryptocurrencies has grown recently, and many young people have started to invest their money in them. When beginning a new job, steer clear of virtual currencies like bitcoin and ether. Much study is required before you can tell one cryptocurrency from another since they are risky and challenging to understand.
Many young individuals are drawn to cryptocurrencies because of the enormous gains they may make. Such investments are often aimed at seasoned investors willing to take a significant financial risk. The Public Provident Fund (PPF) and equity mutual funds are excellent places for new investors to learn about the financial markets.
Talk to a distributor if you cannot afford a fee-based financial advisor. A distributor will ask you basic questions like how much risk you’re prepared to take, why you’re saving money, etc. As the last step, she provides you with a list of mutual funds and small-savings products from which to pick. She helps you complete paperwork, provide you with account statements, etc. You can also choose the best mutual fund app for the most acceptable investment options.
Many websites allow you to invest in mutual funds online. It’s as simple as creating an email account and meeting their Know-Your-Customer (KYC) requirements to open an account with them. Always try to set up a monthly automated transfer of funds from your bank account to your mutual fund schemes. It is generally termed a systematic investment plan (SIP). If you decide to put more money into the same group of schemes, you may also raise your investments in that group.
You may use your online banking service to acquire the Public Provident Fund (PPF) and fixed deposits.
Savings on taxes are possible.
Financial counsellors say they’re typically introduced to saving via tax planning for first-time earners. Every salaried employee is obliged to furnish documentation and accounts of spending and assets that will help them save money on federal and state income taxes throughout January through March.
Increase your savings potential by investing in an equity-linked savings programme (ELSS). Internal Revenue Code Section 80C permits you to deduct the expenditures of these mutual funds. “ELSS gives you a taste of the stock market while saving you money on taxes.
What should You do with savings?
Your asset allocation would include a mix of stock and debt securities in a perfect scenario. Most people starting in the workforce do not have long-term objectives in mind. Some persons opt to remain in the workforce. Students who want to return to school after a sabbatical of two to three years are encouraged to do so. It is tough to make a long-term financial commitment.
Start with a small investment in a liquid mutual fund to get your feet wet. In doing so, this fulfils two goals. A contingency plan should anything go wrong. Liquid funds grow steadily over time and may be withdrawn immediately after putting them. To be prepared for any eventuality, you’ll need a contingency corpus. You should also get good health insurance coverage with your first few paychecks. The more insurance you have, the better it is for you and your family. Experts recommend that one must have at least Rs 10 lakh in range.
It’s easy to rack up substantial medical bills without health insurance, which might deplete your savings and restrict your investment ability. You can indeed plan for these options as you have money to invest.
To save money on interest payments, pay off your student loans as soon as feasible.
Increasing your investments and SIPs and adding a few mutual fund schemes to your portfolio is possible if you have worked for a firm for some time.
As you start your career, there is always a possibility of not being able to save much in absolute terms, but this should never discourage you from making investments. It would help if you learned to manage your salary.
