Personal finance checklist to put your first salary to its best use
4 money moves to make
The first job and first salary are two milestones and turning points that we remember throughout our lives. Many new and young earners may want to use their first salary to splurge a little, treat themselves or to purchase gifts for near and dear ones. However, healthy financial planning habits adopted right at the onset of professional life can go a long way. Here are three money moves you should make after receiving your first salary.
Also read: How young, new earners can create wealth as they earn
Set up auto fixed deposit debits
Banks offer to set up an auto fixed deposit instruction to savings account holders. Under this instruction, when your account balance rises above a pre-determined threshold, the remaining amount is automatically transferred to an FD, which fetches a higher interest than a savings account. This instruction can be set up using an online or mobile banking facility.
Invest in a mutual fund SIP
A systematic investment plan instruction can be set up with any fund house by filling up an online form, submitting KYC details, choosing the scheme, amount to be invested each month, date of investment in the month, tenure of the SIP. Each month on the pre-determined date, the amount of SIP is debited from the bank account and invested into the mutual fund scheme.
Also read: Before investing in a mutual fund SIP, analyse these 5 factors
Protect yourself with term insurance
If the individual has dependents, it is a good idea to buy term insurance, as premiums offered for the young are much lower. If in the future, the individual has more dependents or there is a change in the dependents, they can change the names of nominees. Also, if the cover is found to be insufficient later, one can top it up with additional insurance coverage when required.
Start creating an emergency corpus
In the last two years, many of us have seen grave emergencies, including job loss, pay cuts, death of a family member and so on thanks to the novel coronavirus pandemic. Thus, it is important to have an emergency fund to fight any exigency. An emergency fund is a contingency fund that not only helps financially during most difficult times but also prevents the derailment of your saving for long term goals.
Also read: Why you need an emergency corpus and where to invest your money to create one
Points to note
Before choosing any of the above barring the emergency fund, you need have your KYC documents such as PAN, bank account, identity and address proof in place. One can increase the MF SIP amount each year in line with the increase in salary.