One can rarely forget the first time they land a real job. After all, getting your first paycheck is a big deal. But, sometimes, these fond memories may carry with them uncertain spending habits based on a grave need to celebrate your entrance into the adult world and excitement about finally earning a good wage. However, nothing is more harmful to your wealth than wasting money when you are young. Managing your finances wisely after landing a new job is a skill everyone must master. Even if you are not drawing a hefty paycheck, these financial habits can set you down the right path to building wealth and securing your future:
1. Keep Your Budget in Check
Don’t fret – a budget is just a plan for spending your hard-earned money. There’s nothing worse than realizing Rs. 10,000 evaporated into pizzas and new clothes, and setting a budget is a way to forestall that disappointing phenomenon. So, get an idea of your cash flow. If you see spending more than you make, consider areas you can cut back. Ultimately, it’s all about knowing the difference between a necessity and a luxury.
2. Get Health Insurance
You’re young, fit, and can wait until your 40s to worry about health coverage, right? Wrong. Most individuals find out the hard way about the pain of not having health insurance when they are young- after a simple doctor’s visit for a sore throat leaves them with a hefty bill of thousands of rupees. That’s a best-case scenario. You don’t even want to imagine what happens if you end up in a hospital bed. Therefore, understand the need to independently sign up for a health insurance plan. Though it may not feel like it’s worth the money now, this is another cost you must get used to.
3. Get Insured for Life
As a young adult, you would consider prioritizing moving into your apartment, paying off your debts, and kick-starting a career. Purchasing a life insurance policy may not be a consideration, but it should be. Numerous arguments can be made for buying the best life insurance policy at a young age – the most significant advantage being the affordable premiums. Understand that getting a life insurance cover is the ultimate financial tool for those big “what if” moments. To decide if you need a life insurance policy, ask: “Would someone be financially affected if you were to pass away suddenly tomorrow?” If the answer is “Yes,” you must buy life insurance at the earliest.
4. Build A Cash Reserve
Insurance alone will not cover all your problems; as an added precaution, you must have liquid funds. For that purpose, stash away enough funds to weather a job loss or a sudden major expense without taking drastic measures. The first thing you want to do is start building an emergency fund and save three to six months’ worth of living expenses. Increase that to nine months’ worth if your income is more volatile.
5. Prepare for Retirement
The age you are right now is the best time to start saving for retirement, thanks to the phenomenon called ‘Compounding.’ Here’s how: A 25-year-old individual investing Rs. 4,500 a month, assuming an 8 percent return, can accumulate Rs. 1.08 crore by the time s/he turns 60. That’s a considerable amount! So, start automating a little money in investment plans (like ULIPs or mutual funds) and maybe even increase it each time you get a salary hike. By doing this, you are better positioned to use your hard-earned money to achieve your goals in the future. What’s more, your older self will love you for it.
The Bottom Line:
Right from your first job, making the best use of your money is critical. Getting on the correct path to managing your money will set you up for life. Finally, always aim to make money a source of security and freedom—not a source of ongoing stress.
