Got your first salary? Learn how to manage money
Do your own research and invest in the instruments that you understand and align with your financial goals
Once you start working and get your first salary, your first big responsibility is learning money management.
Three things you must learn when you start working – spend, save and invest.
Spend: Yes, we do need to learn how to spend smartly. Plan your spends, rather than just spend everything you get/ have and become broke before the end of the month. Budget your expenses and plan your big spends in a way that you can afford it. In a world of Buy it now and pay later, what I just said is revolutionary and yes making me very unpopular. But that’s the cost of being the bearer of doing right.
Save: Saving should be first not last. This has to start right from the word Go. Habits are hard to break, so start off with good habits so there is no other way. Spend what you have left over after saving. We as humans adapt quite well, so if you restrict yourselves to a budget, you will get used to it. Also remember upgrading lifestyle is far easier than downgrading it. So upgrade smartly, not continuously.
Invest: Invest correctly right from the beginning, lots of people will give you advise, will tell you to copy them as they are smart and have done so many smart things with their money. Do your own research and do what is right for you. Take term insurance, take health insurance, invest regularly, invest for long term. These are things you should do, the only problem is these are all boring, but at the end of the day this is what works. Start with your PPF account immediately, even if you invest 1000 every year, start. Start your SIP (Systematic Investment Plan) in an ELSS fund even if you start with 1000 per month and even if you’re income is not taxable. Its about habit. ELSS is good because it teaches you that you need to stay invested (lock in for 3 years) investing regularly and not just investing for tax benefits.
This conditioning will help you further in life as well.
Knowing your behaviour and also knowing what pitfalls you could fall into helps in avoiding them. Remember forewarned is forearmed.
(The author is Founder and CEO, Investography; views expressed are personal)