5 Things to do with Your First Salary

When I was in college, I used to make lot of hypothetical plans in my mind that I am gonna do this and that after I get my first First Salary. But the underlying reality is, When you get your first salary and you cannot do everything you have planned with it because it is the lowest pay cheque of your life.

When I received my first salary, I used to login and see the balance in my account for no reason and I used to feel so happy just by seeing it. I don’t have exact idea but i must have done it at least 20 times at first.¬† What did you do? Please comment below ūüĎá

I am writing this with my 8 years experience of wasting, investing and learning money. I have seen youngsters wasting their money on the wrong things. With their money, they either make rich to bigger clothing brands by purchasing branded clothings, phones, bike… or spend money on so called fun things like drinking, smoking etc.

I do a lot of talking on investing money and financial planning with my colleagues and friends and sometimes they criticise me for this. Then I kinda remind myself what Aristotle said long back :

There is only one way to avoid criticism: do nothing, say nothing and be nothing.

So I have made a list of 5 things to do after you receive your first salary. Here they are

Get a Term Insurance

You will meet many new people around you and these faces will change around you. One things will always be the same i.e. Your family. Most of the people who start earning they become sole bread winner to their family after parents gets retire.

No body has foreseen the future and causality might happens. But just imagine, What will happens to your near and dear one when you are no more. Nothing can complete that void but Yes, Insurance amount can support your family in your absence. So do think about this once.

Terms Insurances are cheaper once you get it at early age. It is comparatively offers high risk cover in less amount compare to other. endowment plans.

Note: I am not promoting this plan rather I am simply giving an idea that you can have an insurance cover of Rs 1 Crore by merely spending Rs 552 per month.

Get a Medical Insurance 

Causality is something that comes always uninvited and in the most unwilling times.  You need to protect yourself from financila threat of huge medical expenses. You should take a medical plan for yourself and your family  specially when wearing mask, social distancing have become new normal.
You must see how the world is witnessing new deadly diseases like Zika virus,Corona Virus and so many flues. If you or any of your family member met with any of these disease you gonna bleed financially like anything.

So It becomes very very important for you to have a Health Insurance. You may feel like these things are unnecessary burden to you but believe me its worth taking one and It’s an essential part of Financial Planning.

Note: This is just to give you an idea that you can have an health insurance of 5 lakhs annually in just Rs 363 per Month.

Start Building an Emergency fund

Normally, We do not believe in making an emergency fund because we are reluctant to accept the fact that change can happen any time.  But We forget the fact that almost nothing is in our hand.
In todays scenarios, It is very easy for me to explain why an emergency fund is important because of the lockdown we must have heard of people getting fired from their jobs or not getting salary during the lockdown.
Also lets take a simple scenario, Where everything is normal (I mean the old normal not the new one). Your are attending office at 9 AM and leaving at 5 PM and enjoying at home afterwards and all of sudden you got to know you phone is not working or it got broke. Now you got to know that it gonna cost Rs 8000 for the screen or it’s completely not working . What will you do then?
I know its completely hypothetical but such incidences happen now and then. What will you do then who will you ask for credit? In case you are planning for credit card then you are simply shifting the burden to next month.
Let suppose you are through with the above situation, What if after working for 1 year, you are fired from the organisation not because of your performance but because the company don’t have enough cash or upcoming projects?
At least you need some money to support you till the time you get a job. Let say, It is taking 6 month in worst case. You should accumulate enough cash to manage your expenses for 6 months.
For this purpose, I would suggest to save money in savings bank(25%) , fixed deposit(25%)  and  two debt mutual fund (25% each). You must have heard that mutual fund give better return than Bank Fixed Deposit but I see with that you are putting you emergency fund  in too much risk for 1%-2%  extra return.
Earlier I also used to suggest liquid fund but after the Franklin’s Debt Fund Case, I have started considering Bank Fixed Deposit as a best instrument to put in the emergency fund.

Start Planning  Your Retirement

Every day and every moment we are inching towards and death. Death is beautiful thing which gives you freedom from all your worries and responsibilities this mortal world but before your death there comes a time when you are no more earning i.e. RETIREMENT. You should be ready for that since very first salary. You should project an amount you would need at the time of retirement and start Investing for that. Right now, National Pension Scheme (NPS) is the best tool to plan your retirement because it also gives you tax benefit along with your retirement planning.
Just for an estimate, you can receive Rs 24000 per month as pension just by investing merely Rs 2500 per month along with getting tax benefits upto your retirement. I  have done this calculation for a person with age 23 years and retiring at the age of 60 Years and taken 10% of CAGR with 6% of annuity which is very much reasonable.


Kill the Bloody Loan First

If you had taken student loan for your studies so its now your responsibility to pay it off . Because any loan is a biggest burden to your mind and obstacle to your financial independence. You should start killing it from your very first pay cheque.
In case you are lucky enough and have not taken any loan during your studies then you should start investing for your short term goals like bike, car or even marriage. You can start investing in mutual funds or stocks directly  (NO TRADING!!!).
Apart from all these, You should also do some donation of any kind you like. Donation makes your hard earned money more pure. Please purchase something for your Mom and Dad as a token of¬†Love ūüíõ,¬† Gratitude¬†ūüėᬆ¬†and¬†Respect¬†ūüôŹ¬†¬†¬†for their long term commitment to make you like this.¬†I always wanted to write at this topic. I hope you will like it and Please do let me know how you feel. Also if you have any question comment below, I would love to answer them.