Financial Planning: In today’s time, getting the first job is a big occasion of joy for the youth. For the youth, this is not only the beginning of self-reliance, but it is also the first step towards financial independence. But with this comes the responsibility of proper financial planning. If you are starting your first job, it is time to manage your money wisely and build a strong foundation for the future. Here we will talk about five major issues on which youth should start working soon after getting a job, so that they can manage their finances properly in the future.
First of all start making a budget
The most important thing to do after getting your first job is to keep track of your income and expenses. Making a budget is the first step of financial management. Without a budget, you can easily spend your money on useless things and there will be nothing left for saving. According to media reports, you should look at your monthly income and decide how much money will be needed for essential expenses such as rent, food and commuting. After this, divide the remaining money for savings and entertainment.
For example, if your monthly income is Rs 30,000, you can keep 50% i.e. Rs 15,000 for essential expenses, 20% i.e. Rs 6,000 for savings, and 30% i.e. Rs 9,000 for your favourite things like outing or shopping. Creating a budget will help you understand where your money is going and how you can control it. If you want, you can also use a budgeting app on your phone, which will help you track your expenses.
Create an emergency fund
Anything uncertain can happen in life at any time, like a sudden job loss or a medical emergency. You should have some money ready for such times. You should create an emergency fund equal to 3 to 6 months of expenses. This fund will support you in difficult times and will save you from taking loans. Suppose your monthly expenditure is Rs 20,000, then you should prepare a fund of at least Rs 60,000 to Rs 1,20,000. You can keep this in a separate savings account, from where it can be easily withdrawn when needed. Save a small portion of your income every month to create this fund. It may seem difficult initially, but gradually it will give you great security.
Start investing
Saving money is a good thing, but growing it is even more important. Starting investing at a young age gives you the benefit of compound interest. That is, the sooner you start investing, the more your money will grow in the long run. You can start with options like mutual funds, index funds Systematic Investment Plans (SIP).
For example, if you invest Rs 5,000 every month in SIP and get 12% annual return, you can have around Rs 1.76 crore after 30 years. This is the power of compounding. Start investing with a small amount initially and increase the investment amount as your income grows. Understand your risk-taking capacity and choose your investment method accordingly.
Manage debt wisely
After getting your first job, it can be tempting to take out a credit card or a loan. But if not handled correctly, it can become a big problem for you. Moneycontrol’s article suggests using credit cards for small purchases and paying the entire bill on time every month. This will strengthen your credit score, which will help you in getting a home or car loan in the future.
If you already have a loan, like a study loan, then make a plan to repay it. Keep a part of your income every month to repay the loan, so that you can become debt-free soon. There are many offers on credit cards, like cashback or discounts, take advantage of them, but avoid unnecessary expenditure.
Do not delay in taking insurance
Insurance is often overlooked by people, especially when they are young. You should take health insurance and term insurance as soon as you get your first job. Health insurance will protect you against medical expenses, while term insurance will protect your family if something untoward happens to you.
The advantage of being young is that the insurance premium is low at this age. For example, at the age of 25, a term insurance of Rs 1 crore can be obtained for Rs 10,000-15,000 annually. It can also be used for tax savings. Give priority to insurance to secure your and your family’s future.
According to experts, the first job is a new chapter in your life, and it is also the right time to become financially strong. Keep an eye on your expenses by making a budget, Prepare for tough times with an emergency fund, grow your money with investments, manage debt wisely and secure your future with insurance. These five tips will not only ensure a smooth future for you, but also lead you to long-term financial stability and success.