“No more classes, no more exams,
no more grades and no more dorm rooms.
Welcome to a life of independence
and the freedom to pursue your dreams.”
There’s money in hand, but also more responsibilities. Receiving the first pay cheque is a defining moment, a mark of independence, a sense of self-made-well-earned-pride. It is only natural to have the urge to splurge at this point. Treat yourself modestly, and pay respects to those who matter most in your life. This may appear a philosophical advice on financial matter, but nevertheless will keep you grounded to reality.
So, don’t shun, go ahead and pay respects to your parents/ mentor; gift them something, donate some in the name of almighty, treat yourself and loved ones at a nice restaurant, pamper yourself, get into shopping spree etc…but in moderation.
“Life is to live today and secure your tomorrow”.
However, our Financial Planners counsel advise looms large in our ears,
“One should start investing as early as possible!!”
When you have no pressing need spend it is only sensible to save some & invest the rest. Let the money grow. Investing with the intent to reap benefits is a skill and an art. This requires careful and dedicated study and planning. So, until you are ready, it is safe to deposit in your bank’s savings / term account. It will still earn some interest, while being parked for later use.
However, here are few things you could do with your first salary while you learn the ropes on money management:
Loan on education is a good thing. It helps you prepare for the future ahead. So, it is only responsible to begin to clear this loan as and when finances permit. Earlier you clear the loan, earlier you can breathe the sigh of relief. You also get a tax benefit on education loan under section 80E of Income tax Act.
Health is wealth, however cliché this might sound. Sickness doesn’t come with warning. So, it is only prudent that you invest your well being. Should finances permit, take up a family health insurance for your dependent members
Little drops of water make a mighty ocean, cliché again. It might be difficult to set aside a large sum from your first salary. But that should not stop you from start saving it small. A recurring deposit within the range of 500-3000 will sum up to a reasonably good amount at the end of the term.
Most companies deposit in their employee’s PPF scheme. Consult your HR. Should this be not the case with your company, open up a PPF account with any nationalized bank and start saving. PPF has the double benefit of getting exemption for Tax reasons; this is also to save for your retirement years. You are young and robust now. Old age may not be the priority now. However, we all get old as the years pass. Let us be self-reliant when we can no longer afford to go to work.
This is something that you need to put in action in your subsequent salaries. Study the market, read finance blogs / publications. See how money flows in and out in the stock market. Mock up investments with imaginary money on select stocks and see how they perform. Evaluate your judgment. As an early starter, your “risk appetite” is likely to be high.
Not sure what risk appetite means, well… That’s exactly why you should educate yourself on financial plans.
Investing in the stock market can reap big dividends. But this can also cause abysmal loss to finance, confidence and emotion. So start teaching yourself on different financial instruments. When done well, you will be happy that the time spent is well earned.
First salary has an emotional overtone. It floods your memories with the trials and tribulations you have been through to be holding The First Pay Cheque. So, make your actions worth those memories.