Starting your first job can be an exhilarating experience. It is also the time for you to lay the foundation for the rest of your life.
Getting employed and earning a salary for the first time in one’s life…it’s an experience one never forgets. However rich and successful one becomes in later life, one never forgets the first paycheque, the first purchase made using one’s own money, the first time one hands over their entire salary to their parents…
But while it is exciting to become financially independent, most working youngsters are unaware of one basic fact: one can only claim to be financially independent if one is financially responsible. The adage about ‘No freedom is complete without its boundaries’ is relevant in this context. With every salary that you earn, must come savings. The savings habit must be inculcated early on in life, because it is a difficult habit to instil, especially when funds are low. It does not do to be like many young working people who splurge their entire salaries almost as soon as they receive them, thus being left with hardly any money by the end of the month.
Hence, it is important to make a financial roadmap for the future and stick to it. Consider the steps in this process:
* Make a financial goal: What is most important to you? Make a list of all the dreams you want to realise. It may not be possible to achieve them in a short span of time. Besides, each dream requires a sum of money for fulfilment. Set a financial goal for each year, wherein you resolve to set aside a certain sum of money in the form of savings or investments to achieve your targets. Look at this plan often to motivate yourself.
* Start saving. If you do not save money from whatever you earn, however modest, chances are that you will not save even when you earn a handsome salary at a later date. Aim to save at least 20% of your salary every month and set it aside in a dedicated savings account. Divert incidental gains (such as bonuses, increments in salary, gifts from relatives, etc.) in this savings account. Most importantly, do not dip into this fund for any reason. Your savings are meant for the future, not for everyday expenses.
* Curtail expenses. It is tempting to eat out often, party with friends, go out every weekend and shop for clothes regularly. However, these expenses drain your finances irretrievably. Inflation and rising costs have increased the cost of entertainment and travel, so you end up spending a lot of money in a short span of time. Remind yourself that it takes a month of hard work to make what you can spend in a week. Curtailing unnecessary expenses will save a lot of money for you.
* Make investments. You cannot grow your wealth simply by setting up a savings account – you must increase the corpus by compounding. Invest in savings schemes, bank fixed deposits, or the equities market. Get inputs from an investment expert who can guide you basis your income and short-term and long-term goals. When you get returns on these investments, divert the additional income back to your savings fund.
* Make an extra income. You can pick up extra money by freelancing on the weekends. Or if you leave work early, you can take tuitions for an extra income. If you have a skill you can monetise, you can create a parallel channel of income for yourself.
Keyword: savings account