Your first job is one step forward into adulthood and a time when you begin to assume responsibility for yourself. Every first feels like a milestone – the first day, the first project assigned to you, the first time you hand out your business card to someone and even your first salary. However, this is where most people forget to build the corpus for their future. It is good to enjoy the freedom and spend money but also the time to start building your savings to work towards gaining financial freedom. Here are five sure shot ways to optimise your savings from your first salary.
1. Create a Budget
First thing you need to do is to understand your cost to company package and what your take home salary is. Next step is to create a budget from your monthly salary with your fixed expenses each month that includes your utility bills, salaries you might be paying for domestic help, travel expenses, any EMIs you might be paying towards a car payment or credit card bills. Add that to any variable expenses you might have each month, which would include groceries, entertainment, holidays, etc. This exercise gives you an idea of your discretionary income that is your take home salary minus your monthly expenses. This is the amount of money that you can potentially save. Your budget must also include a debt management component. If you have high-interest credit card debt, try paying off a bulk of the amount month on month to reduce the minimum due. If you have a student loan, work that into your budget in such a way that you can consolidate all your debt and are paying off your monthly installments with ease. ICICI Bank’s My Money gives you that perfect overview of your account as it allows you to track your transactions and divide them up into custom categories like bills paid, eating out bills, EMI payments, etc. You can set payment alerts of all your dues to make sure you are always on top of all your finances. You will be able to track effectively how much you are spending each month.
2. Build your Retirement Fund
It is never too early to start saving for your golden years. If your company has an Employee Provident Fund, it will automatically start creating a retirement fund for you. The earlier you start saving, the longer your investments will grow and the more money you will potentially make over the years.
3. Avoid Unnecessary Spending
One consumer behaviour you should try to break is the habit of impulse buying. Whether it is the latest smartphone in the market or a sale at your favourite store, stop to think if you would really benefit from the purchase of these items and most importantly, does your current budget allow for such an expense. Especially in your first few months at work, it would be ideal if instead of spending lavishly, you get used to allocating a self-assigned budget on spending conservatively, keeping a keen eye on your financial priorities at all times.
4. Set your Financial Goals for the Future
Your current salary may just be barely covering your rent, but you have to visualise really where you see yourself five or even ten years down the line. Working on that mentally now will give you time to start planning for your biggest financial milestones – like buying a house, getting married, having a child or even taking a trip around the world. Start saving small amounts on the side, whatever little you can, to be prepared when you reach the milestone. ICICI Bank’s iWish is a flexi recurring deposit account that you can alter according to what amount you want to save every month. If you are low on funds a particular month, you can simply choose to save a smaller amount and on a good month if you have extra money in your account, you can put in more.
5. Get Insured
This is a vital addition to your financial portfolio that you might think of delaying until a time when you are older or are earning much more. In reality, though insurance is a must-have. Beyond health insurance, life insurance is an important part of your savings plan, especially if you have people who are dependent on you. In the event of any unforeseen incident, insurance cover goes a long way in ensuring that your loved ones are taken care of.
Saving money may pose a challenge at first, but if you focus on a well-planned and meticulously executed strategy, you will be surprised to find a surplus amount that grows every month over many years, giving you greater access to building a great future for yourself.
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