The excitement of getting your first pay check could be beyond measure. Plans like throwing a party to your friends, paying off debts, buying gifts for your parents, indulging in charitable acts etc. would have already occupied your mind. These are some of the common things that everyone does on getting the first salary. However, it is also the high time you understand few financial concepts to make the money work for you ultimately.
As you step into the world of your own finance, a little bit of financial literacy and financial planning is imperative to manage your credit. Start early, it is possible that most of you are in your 20s and you will reap the benefits much earlier.
Tip #1: Understand Savings
It is still early days and you have, your whole career ahead of you, resist going on spending spree to buy the things they yearned to have or to travel to the places they wished or to indulge in fun-filled activities. Though these are not bad things to do, overspending could leave you broke at the end of the month.
Allot a certain portion of your income exclusively for saving. Strategize your savings for 1, 2, 5, 10 and 15 years and attach a goal along with it. As you make progress in your career, you will find it easier and beneficial for your timely need.
Tip #2: Understand Credit
Credit is very simple, borrow from lenders for your needs beyond your means and repay with an interest. The factor based on which a bank lends to you is known as the credit score and it represents your worthiness.
Get a look at your credit score, if you haven’t already; a good score (above 750) leads to better loan offers. If you do not have a credit score now, work towards obtaining one as it will serve you well in the future.
Tip #3: Understand Investments
Many people wish to buy a car or two-wheeler once they secure a job. Though it is a necessity, investing in a depreciating asset or liability would bring additional expenses to you. There are lot of investment options that keep growing and all you may have to do is invest a minor part of your income into it. Make a thorough research and invest smartly to enjoy the benefits abundantly.
Mutual funds, stocks, bonds, real estate, gold etc. are some of the investments that may grow in value in the future.
Tip #4: Understand Taxation
Paying tax to the Government is a legal duty of every citizen. Once you become a salaried employee, you are bound pay income tax. It is also high time you understand how the tax slabs are placed and you come in which category. One can claim tax deductions under various sections for specific credit activities prescribed by the Income Tax Act. Insurance policies, PPF account, tax saving mutual funds and fixed deposits, interest on education loan, home loan, charitable donations etc. are eligible for tax deduction. By wisely choosing any of the above tools, you can not only benefit from their returns but also gain tax benefits.
Planning your finances, can help you manage a lot of problems and offer you a peace of mind in life. Commence your financial planning early and start reaping its benefits while you still have time to enjoy it.