Getting Your First Job? Here’s 6 Things You Should Do

The writer is a Delhi based Certified Financial Planner CFPCM, conferred upon by the
Financial Planning Standards Board. If you are an Indian resident looking for a financial plan prepared according to your needs & goals, write to her at shruti(AT)richesawait.com

first job financial planningGood work on landing your first job! I’m sure right now you are filled with pride & feeling invincible.

But remember with great power comes great responsibility, it’s your responsibility to handle your finances carefully. Don’t worry it’s not rocket science, all you have to do is develop good money habits from the start by following the below checklist. Your older self will be grateful to you if you start taking care of your hard-earned money from the get-go.

Just work on the following, it will give you a head start in managing your money.

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  1. Be Debt Free
    If you have a clean slate it’s up to you to write your money story. The first thing to remember is staying debt free. Don’t start buying things you can’t afford right now (like a car or a house) on loans. Also, don’t get carried away with your new credit card, learn to spend within your means. Debt trap is a very nasty thing to fall into.

    For others who already have debts (like student loans), make paying off your debt a priority. Start paying it off from the first salary itself and be aggressive about it. The sooner you pay it off the better. The feeling of relief and calm that one gets after being debt free is unparalleled so make that your number one goal.

  2. Take Care Of Insurance
    One of the main items on the financial-responsibility-checklist is getting insurance. Take advantage of the fact that insurance premiums increase with age, so get insured as soon as you start earning. The first insurance policy you should take is health insurance.

    Don’t fool yourself by thinking that you are too young to worry about health issues. Medical emergencies can affect anyone, therefore it’s best to prepare for them when you are young and fit, this way you will get a bigger sum-assured on a low premium. Your employer may offer some health cover but often insurance policies from employers keeps one under insured. Moreover, you will be dropped from the coverage as soon as you leave your job. So it’s best to opt for personal insurance as well on top of it. Remember to make sure dental is included in your policy.

    If you have dependents, invest in a term insurance at an early age so that you can get a higher sum insured for lower premium. I’ve written about how much life insurance cover one needs here.

  3. Make a Budget
    Allocate a specific purpose to each Rupee or Dollar you earn by creating a budget and use this budget as your spending blueprint. Being aware of how much you’re spending and where gives you control over your money.

    When you start earning money it is a bit like getting a new puppy. You can either train the puppy to obey your commands and think of you as his master, teach him tricks & make him come to you when you call his name or you can keep running after it, pleading, bargaining, and reasoning. Same is the case with Money. You can either master it, be in control, take charge or you can let it do whatever, not caring if it’s up to any good or not.

    If you keep track of money coming in and flowing out, you can stay out of financial trouble. Make sure that monthly expenses are within limits of your monthly income. If you end up using credit cards in addition to your income to pay for expenses, evaluate & take necessary steps as this is the beginning of trouble.

  4. Create an Emergency Fund
    It is essential to have a cushion to fall back upon when faced with a difficult situation. Start building an emergency fund that will cover around 6 months of your basic expenses and park this amount in an easily accessible financial product like a savings account or liquid funds.Understand that you are creating this buffer for unforeseen expenses, therefore make sure that you don’t dip into this fund when you “feel like”, otherwise you’ll never have a reserve for emergencies.Find out how much you need to set aside for your emergencies with the help of this calculator.
  5. Avoid Bad Spending Habits At Work
    This being your first job you might want to make an impression on others. In your desire to impress others and fit in, it’s easy to fall in the habit of going out for lunch every day with the co-workers. Or driving to work and paying for parking just because everybody else does the same.

    These small daily expenses act as budget-busters
    and also create a hurdle in your path of creating wealth. Stop seeing these unnecessary expenses in solitude and start seeing how much money you will lose over long term.Start giving importance to your hard earned money over the desire to fit in.
  6. Start Investing
    Keeping all your money in a savings account isn’t a very smart thing to do as you will lose your money due to inflation. Start investing your savings. Start small if you are new to investing but start nonetheless. Opt for an SIP, you can start with as low as ₹1000 and go upwards from there.

    The point is that once you start seeing your money grow, you will be motivated to save more and invest to create more wealth. The best part is, if you start investing now at the start of your earning life, you can spend a lot of time in the market and create a lot of wealth by the time you start settling down for a more easygoing lifestyle. Plus you can fulfill all your goals like owing a house or a car or vacations with the help of a proper investment strategy.

No matter what your designation or income is at your first job, if you check off the above 6 tasks you can promote yourself to CFO – chief financial officer of your life.
Congratulations on your promotion! 🙂

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