Starting with your first job? 5 money moves you need to make to become rich

By: |
Updated: May 30, 2019 12:02:31 PM

In case you have just begun with your first job and are still figuring out what financial planning means to you, here are a few smart money moves to get you started.

how to become rich, job, first job, 5 money moves to make to become rich, Budgeting, save, invest, tax savingInflation, rising medical risks and other uncertainties call for disciplined savings and finding ways to increase your income.

Starting with your first job is a feat in itself. You may spend your first few salaries celebrating this success. But being in perennial celebration should not become habit. You don’t know what the future holds for you. Inflation, rising medical risks and other uncertainties call for disciplined savings and finding ways to increase your income. A job means having a steady flow of income, and it should be used to create wealth. Since liabilities are few when you begin your career, you should consider judiciously saving and investing your money to create wealth. In case you have just begun with your first job and are still figuring out what financial planning means to you, here are a few smart moves to get you started.

Budgeting

Effective budgeting helps you understand your income and cash outflows. The difference between the amount earned, and your mandatory and discretionary expenses, gives you a figure that you can save. Usually, at this stage of their lives, people make the mistake of not channelizing these savings into investments. Just as you allocate towards fixed expenses, you must allocate towards investments at the beginning of the month. With your investments done, you can enjoy the balance in a stress-free manner for the rest of the month. You should ideally try to set aside at least 20% of your income for savings and investments. The more the merrier.

Define Your Financial Goals

Everyone wants to be rich but how much money you need to become rich is difficult to gauge. This is where framing financial goals before investing helps. It quantifies the money you would need in life to be financially secure. Start with setting up your financial goals at the beginning of your career. Expenses will keep popping up, but your financial goals will help you stay on the investing track. Whether it is about buying a house or planning a foreign vacation, have a goal in place and assess the amount of money you would need when the goal is due. Goals can be either short-term, mid-term or long-term. For example, saving for getting married may be a short-term goal, buying a house could be a mid-term goal and saving for your retirement is a long-term goal.

Select The Right Investment Instrument

The sooner you start saving your money, the closer you will be to wealth creation. Since building a corpus takes time, identify the investment instruments suited to your financial goals. You can either choose safe options like recurring deposits, fixed deposits and PPF or go for riskier propositions like equity mutual funds for better returns. A mutual fund Systematic Investment Plan (SIP) can help you build a handsome corpus in the long run, and you can start investing in this with an amount as small as Rs 500. You can also take the guidance of a financial advisor on saving and investing. But do remember: regular and disciplined investing will take you a long way in wealth creation.

Save Tax

Usually, at the beginning of the career, tax saving is not a priority as your income is not high and you may not be aware of the taxation rules. But large starting salaries as well as accelerated income growth in the corporate sphere are common. Therefore, it pays to pay attention to tax planning. It reduces your taxes, increases your disposable income, and helps you pick investments that have low tax incidence. So keep yourself updated about investment options that help in tax saving. You can invest in ELSS, PPF, and NPS to get maximum tax benefits.

Get Yourself An Insurance POLICY

An insurance cover works as a protection against unforeseen events. If you have dependents and any other financial liabilities like a loan, it would be wise to take a term plan at the beginning of your career. It will work as an income replacement tool in the event of your untimely demise. Buying a life insurance policy early will fetch you a high insurance cover with affordable annual premium. With a rise in lifestyle diseases and medical costs, it makes sense to have a health insurance plan to work as a hedge. You may be covered by the group health insurance plan through your employer. However, that may not be adequate in meeting your medical needs. A medical insurance plan is an essential need, and it will also protect your finances against the impact of a costly hospitalisation.

Finally, as you and your income grow, regularly review your income and investments, and make the alterations and step-ups necessary to accelerate your wealth creation.

( The writer is CEO, BankBazaar.com)

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.