Along with first pay check, we all get responsibilities on our shoulders.
As soon as we youngsters get their first job, it’s important for them to know how to build wealth in a right way and how to take proper financial decisions to lead happy life.
Read on to know some vital financial management tips especially for early earners in order to keep your finances intact.
- Lean To Save.
One has to learn to how to spend less and save more when you have just kick started your career. Financial gurus suggest that savings should be started from early age. One should leverage the power of compounding. So make sure you save so that your money grows as a result of compounding.
Keep this mind: Savings = Income – Expenditure
Calculate your few necessary recurring expenses and withdraw that much amount only. Stick to the same pattern as discipline in terms of saving is important.
- Have Contingency Fund.
People end up in debt because they never save for emergencies. Emergencies could include unexpected medical expenses, any damage, and loss of job or financial crisis. So instead of taking loan one can rely on their emergency fund.Your emergency fund should ideally have the equivalent of 3-6 months of your income. So that if you lose your job you can survive for few months till you get another one.
- DO NOT Take Loans.
It’s a wise move to avoid loans, especially on depreciating assets. People have to accept the rude truth that these loans are traps.
- Start Recurring Deposits To Buy Expensive Goods.
This is one of the ideal ways to buy something. This will help you to develop saving habit also over a period of time you will understand whether you really want that thing or not.
- Chalk Out Your Financial Plan.
There’s a famous saying- If you fail to plan, you plan to fail. It is advisable that you make you financial goals. It could be a monthly or yearly basis one. Draw up a budget to get a clearer picture of needs and wants. In short know your priorities and spend accordingly.
Divide your income in 4 parts.
1/4th = Needs
1/4th = Savings
1/4th = Contribution/Entertainment
1/4th = Risks, ventures, investments.
- Invest smartly and save for retirement as well.
It is important to know very well about investment. If you invest in wrong mutual funds or shares your hard earned money will flew away in no time. According to financial gurus, one can go for several government investment plans or PPF (which provides tax benefits as well) that will bolster your retirement fund as well.
- Keep a track of your income and expenditure.
You should have an idea of cash flow and expenses. This will give you the picture about your lifestyle and whether your finances are in sync with your goals.
8. Live Simple.
Avoid impulsive spending as soon as you start earning. Showing off can recoil later so one should have a balance life which will have both lavish and necessary things.
Do not wait, lay out your plan for success right way.
Article Inputs From- Quora.com, IndiaInfoline.com and BusinessInsider.in