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How to Make the Most of Your First Pay Cheque

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May 18, 2018
Nothing can ever replace the feeling you get when your phone beeps to alert you that money has been credited into your account. If you're just starting off in your career and this is your first ever salary credit, chances are you will savour this feeling for a long time to come. Moreover, while we understand that you may want to spend your entire salary on a few new Xbox games, or those shoes you've been dreaming about, it may be a good idea to stop for a moment and plan a little.

While budgeting may not be something a 20-year-old work fledgling may want to deal with, it's important that you start planning for the future right now. Why? Because very honestly, the earlier you start, the more time you will have to save up for later. Think about any kind of collection. Whether you're a hard-core philatelist or simply enjoy collecting old coins as a hobby, the earlier you start, the more time you will have to expand your ever-growing collection. In much the same way, the earlier you start investing your money and putting it away in a retirement fund, the more time you have to grow your nest egg for a rainy day.

So, before you go out and Fsplurge your entire first pay cheque, here are a few things you should do:

  1. Put something away in savings

    Most people say that your salary minus your expenditure equals savings. We'd like to flip that notion over. The minute your income is credited to your account, put a percentage of your salary into a separate savings account. As a general rule of thumb, you'll want to put at least 10% of your earnings into savings. You can keep this account as an emergency fund, and only dip into it when you absolutely need to. Until then, you can enjoy earning interest on these savings. Once you've secured some money in this account, you can budget the left-over money as your expenses.

  2. Take care of any debts

    Whether you need to pay your parents back for something or make payments towards a student loan or EMI, ensure you budget these debts into your monthly expenses - once you've got your savings in place, of course. The quicker you start paying off your debts, the earlier you will be relieved of the financial burden of a growing interest.

  3. Think about investing

    The idea of putting your hard-earned money in stocks and bonds may seem like a daunting task, but there are many safer investment options that you can think about. You can put your money in a secure Systematic Investment Plan (SIP) or even a Unit Linked Insurance Plan (ULIP) to build up a corpus for your retirement. Even a small amount of Rs. 1,000 put away in an SIP every month can help you in the long run.

  4. Understand your taxes

    Once you check your first salary credit, you'll understand that a small portion of your total income has been cut as tax. While the amount may seem insignificant now, as your income grows, so will the amount of tax that you will be required to pay. Thankfully, there are several investment opportunities that you can look at that will help you enjoy tax deductions, while keeping your money safe and helping you grow your corpus for retirement.

  5. Secure yourself - not just your finances

    While we understand the importance of securing your finances for the future, it's a good idea to also think about your own safety. Life is unpredictable, and we never know when a disaster might affect us and our family member. Look at buying yourself a life insurance policy and a health insurance policy so that when the need arises, you and your family members will have some financial security during a trying time. The younger you are when you pick a policy, the lower your premiums are likely to be.

While we understand the thrill that comes with earning your first salary and being able to spend your own money on whatever your heart desires, we simply cannot ignore the fact that we need to be prudent with our financial decisions. While splurging every once in a while, is absolutely fine - it's a good idea to think about savings and investment before you hit the mall with your friends. So, before you go ahead and spend that vey first pay cheque, remember that wealth creation for the future can start as early as today!

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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