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 you land a new job is a skill that every individual 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 how you spend 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 that you are spending more than you make, think about areas you can cut back. In the end, it’s all about knowing the difference between a necessity and a luxury.
2. Get Health Insurance
You’re young, you’re fit, and you can certainly wait until your 40s to worry about things like 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 on a hospital bed. Therefore, understand the need to sign up for a health insurance plan on your own. Though it may not feel like it’s worth the money now, this is simply another cost you will have to get used to.
3. Get Insured for Life
As a young adult, you would generally consider prioritizing moving into your own apartment, paying off your debts, and kick-starting a career. Purchasing a life insurance policy may not be a consideration at this time, but it should be. Numerous arguments can be made for purchasing 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 this question: “Would someone be financially affected if you were to pass away tomorrow suddenly?” 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; you must have liquid funds in hand as an added precaution. For that purpose, stash away enough funds so you can weather a job loss or a sudden major expense without having to take 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 up to nine months’ worth in case your income is more volatile.
5. Prepare for Retirement
The age you are right now is the best time to start saving towards 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:
It is critical to make the best use of the money you earn, right from your first job. Getting on the correct path to managing your money will set you up for life. Finally, always aim towards making money a source of security and freedom— not a source of ongoing stress.