Create a budgetBudgeting is necessary to be prudent with money. Craft a budget to understand the needs and wants. When you are in the first year of your job, probably you will have lesser needs. However, with a budget, you are less likely to splurge.
InvestInvestment is necessary to build a corpus for various life goals. Invest in various financial instruments to amass wealth for financial goals. You can start small through systematic investment planning (SIP) in mutual funds, which allow you to invest as little as Rs. 500 per month.
Avoid discretionary expensesA prudent way to manage salary in the first year of your job is to avoid discretionary expenses. The new-found financial freedom often leads to unnecessary spending. Reduce them for your financial well-being.
Evade lifestyle borrowingsIt is important to evade lifestyle borrowings, particularly short-term loans, as they accompany a high- interest rate. This can strain your finances. Also, since income is on the lower side in the first year of the job, it’s prudent to avoid taking such loans.
Automate savingsAutomating savings will help you manage your salary in a disciplined manner. You can give standing instructions to your bank to automate your savings into your chosen financial instrument. In fact, there are several financial instruments such as mutual funds and recurring deposit that allow you to automate your savings.
Buy insuranceInsurance is an essential aspect of a sound financial plan. Generally, when you are into the first job, you are young and healthy. This expedites your chances of getting your application processed faster. Opt for a term and health insurance plan that best fits your needs.
Follow the 50/20/30 budget ruleThe 50/20/30 budget rule can help you to be prudent with your money. As per this rule, 50% of your salary should be spent on needs, 20% should be saved and the remaining 30% should be reserved for discretionary expenses.
Use discounts and cash backsMake the most of discounts and cash backs on offer from payment wallets. The cash backs accumulated help you make significant savings in the long run.
Effective money management is an art learnt with time. An early beginning helps you compound your wealth in the long run.
Learn more about Mutual Funds for a good personal financial management.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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