Making the Most of Your First Salary: A Guide to Financial Success

Making the Most of Your First Salary

After long years of studies, internships, and struggles, when you finally get a job, it feels like you have everything in your life. It’s exciting, it’s empowering! But hold on. Before you start fulfilling your wish list, let’s talk about something that you can do with your first salary. It’s nothing but setting yourself up for long-term financial success. 

Initially, getting your first salary might make you feel complete, but in reality, it is just the first step of your life. Here in this write-up, we will be talking about every possible way that will help you build wealth. So, without any further ado, let’s find the ways right below. 

Step 1 – Time For Celebration, But Responsibly 

When you receive your first salary in your hands, it’s a time for celebration. After all, it’s a milestone in your life. Gift yourself and your near and dear ones something that you have always dreamed of. But there is a key: make a budget for your celebration, let’s say it could be 5 to 10% of your first salary. This way, you can make a smart decision to enjoy your success and also plan for your future. No matter what salary you get, the ratio should be intact.

Step 2 – Understand Where Your Salary Goes

Once you are done with all types of celebration, it is time to understand your income and your expenses. You might have some familial responsibilities or your own responsibilities. Just ask yourself 3 questions first. 

1. What are your fixed costs or expenses? Like transportation, rents, bills, medication, term insurance premiums and others. 
2. What are your flexible costs or expenses? For example, shopping, entertainment, dinner dates, and many others. 
3. Are there any irregular expenses coming up? Like travelling, celebrations, various kinds of subscriptions, and others. 

When you are aware of these three things, you will be able to manage your money ideally. 

Select Your Savings Plan

To make your savings plan from your first salary, you have multiple options such as 

50-30-20 Rule, where the 50% is for your basic lifestyle names like electricity bills, rent, and others. 

30% is for entertainment like dinner at restaurants, shopping, and more. 

20% will be for your goals, like an emergency fund, retirement plan, etc.

Step 3 – Create an Emergency Fund.

Once you start getting a salary, you should have a plan to save money as an emergency fund. According to the expert, if you save a corpus of approximately 6 months of your salary, then you would be able to make your emergency fund. Generally, it helps in any kind of financial crisis like medical emergencies, urgent credit bills and others. 

Always remember for emergency purposes, you have to choose funds that have better accessibility and better liquidity; therefore, liquid funds, sweep-in FDs, or high-yield savings accounts for emergency purposes. 

Step 4 – Insurance 

Life is uncertain! Apart from creating your emergency fund, it is very important to secure your family’s and loved ones’ future. This is where life insurance and health insurance come into play. Select a simple term plan that will help you in safeguarding the family if something unfortunate happens. 

Step 5 – Choose Your Financial Goal

Before you get a salary or a job, you probably had some goals in life. Something which gives us direction in life. With your first salary after creating an emergency fund and insurance, divide your goals into 3 parts.

1. Long-Term Goal: The long-term goals refer to retirement planning, buying your dream home, and others. Generally, this kind of goal takes a minimum of 5 to 6 years to be fulfilled. 
2. Short Term Goals: The short-term goals are basically paying student loans, buying a car, planning for vacation and others.
3. Ultra-Short Goals: These kinds of goals are like saving for gifts, buying a mobile or other electronic appliances, planning for a birthday party and so on. 

Step 6 – Mutual Fund Investments

If you compare, the new generation is much further ahead. They are aware of investments in mutual funds and the share markets. We all know that Mutual Funds are one of the ideal options to achieve the dream of long-term wealth creation. No matter what your salary is, you don’t need a huge amount to start your first investment. Using two methods, you can achieve a disciplined investing strategy. Let’s have a look below,

1. Start a SIP

A SIP or systematic investment plan gives you a special opportunity to invest a specific amount every month. You can start with even 500 rupees. Continuing SIP is an easier option. Here you don’t have to be aware of the market timing, because the amount will be directly deducted from your linked bank account. With SIP, investors get the opportunity to enjoy the power of compounding. 

2. Do Lump Sum Investments 

For a lump sum investment, you have to make a single investment. If you are ready to invest a considerable or required amount at one time, then a lump sum investment is a good option for you. In terms of wealth creation, investing the entire amount for a long duration works magically. 

Wrapping Up

Money is a thing that helps you build a dream life, it shouldn’t be a thing that gives you endless anxiety. When you start understanding financial management from an early age, it will always help you to manage your finances in a better way, as time passes. Always remember your first salary is just the beginning of your financial discipline, so start with baby steps, stay consistent, and always remember every smart choice you make at your young age will bring you closer to the life you have ever dreamed of.

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Disclaimer – This article is for educational purposes only and does not intend to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the scheme-related document carefully before investing.