Receiving the first paycheck can be a milestone in your life. After all, it signifies your transition from a student to an independent individual. You no longer have to request money to purchase what you want. However, that first paycheck is also a bearer of responsibilities. What you do with your money and how you build your future is entirely in your hands. If you need guidance to figure out how to manage your money, here are a few ways to help you chart a better future.
1. Clear your education loan - The first and foremost step to building a financially secure future is to clear your debt. You have fewer responsibilities when you are starting a career. Take advantage of the situation and focus on settling your loans. The longer you wait to repay, the more interest you ought to pay.
2. Chalk out your goals - Ask yourself how you see yourself in the future. If you imagine yourself living in your own house and being financially secure, you are on the right track. Many things may not strike you at this point like saving for your marriage, children’s education, post-retirement life etc. You want to seek the counsel of your parents or a financial advisor who can guide you about these things. Read up and build your list of life goals so that your motive behind investing becomes clear.
3. Utilise the power of compounding - With your own money, you may get tempted to fulfil your desires that you have suppressed for long. A new cell phone, a car for your father, a watch for your mother, the list goes on. You can fulfil all these but on a gradual note. Remember that early investment can give you maximum returns. If there is something that all financial experts agree upon, it is the power of compounding. Investments at an early age will not only help you achieve your goals but can also exceed them. Every year that you delay can cost you in tens of lakhs.
4. Build an emergency fund - Life is not all rainbows and sunshine. A family or personal emergency can strike anytime. Not being financially prepared can affect your daily life and future. An emergency fund can provide you with the money you need during emergencies. An important tip is to save an amount worth three months of your earnings in an emergency fund.
5. Get a grip on taxes - Taxes can affect the salary you take home. If you are not careful with your investments, you could end up paying a considerable amount in taxes. Consult a financial planner to understand your options and maximise your tax benefits. Select the option that will also suit your financial goals in the long run.
Money management can seem daunting at first. It becomes more relaxed with the right knowledge and instruments. The key to a healthy financial life is to begin saving from your first paycheck.