What you need to know before you earn your first salary?
This data about job, financial literacy, and rise in person loan reveal some interesting facts.
- Every year 10-12 million people enter the job market in India. These people will encounter their first earned money.
- Despite high education levels, working young people in urban India don’t fare well as far as financial literacy is concerned, says an Indian Institute of Management (IIM)-Ahmedabad study. (Source)
- Another data to relate is India is seeing a huge jump in personal debt. During last 4 years, personal loans spiked 60%.
These data indicate why money management lessons for the young Indians who are entering the job market are very crucial.
- Investing in all kinds (incl Unsecured) of financial instruments and currency online
- Stock market investing,
- Spreading fake news/tips, and,
- Social media share of a splurge by peers/friends/ relatives.
This ease makes it hard to resist the temptation. This ease makes it easy to get trapped in the debt. These kinds of ease are dangerous.
“Formal education will make you a living; self-education will make you a fortune.” Jim Rohn
This is why before you cherish your first salary; you need to be prepared to deal with it. You need to know the pros and cons of dealing with the money. We are not taught money management in the college.
- Shun extravagant lifestyle:
This becomes addictive and unsustainable over the period of time. This can compel you to do wrong things to earn money.
- Shun investments schemes offering unreasonable returns:
There is no magic. Any return between the bank FD rate and long-term equity return is the reasonable rate of return. Anything beyond these rates is risky. It is only weak companies /borrowers pay high interest and promise an unreasonable return. Don’t let your greed make them successful in raising money.
- Start saving:
An early saving habit is the first step to become wealthy earlier.
- Buy life insurance policy:
Earlier you start you pay less premium and longer tenure will get the substantial amount on maturity.
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- Buy health insurance policy:
This is essential for the family. Cost of medical treatment makes it mandatory.
- Use the credit card for convenience not to overspend:
It’s very tempting to use the credit card for spending on things which you can’t pay immediately. This money is very costly. Beware. Buy less but resist the temptation to use credit card overspend.
- Avoid loans except for home loans:
Home loan is the only loan which goes into an appreciating asset i.e. your house. Rest all personal loans are for expenses. Spending by availing loans is a dangerous habit.
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- Keep a record of your income, expenses, and investments:
This is important. This can help you track your expenses. This also helps in keeping a record of your investments made from hard earned money.
- Once in a while, splurge and enjoy your earnings but within your means:
Yes, you should splurge once in a while. At the end of the day, you earn to enjoy. At this age with no responsibility, spend your money on your hobbies and fulfilling your dreams. Just do it. Do it within your limits.
- Educate yourself about money management and investments:
There is no choice. The money will remain part of your life until you die. Knowing the rules of money and investment management will not only be useful in your personal life but it will help in your career.
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- Do charity howsoever little:
Helping others is a conduct of a good citizen. When you have it you have to think about the have not’s. Remember, true happiness comes from spending for the needy.
Before you encounter your first earned money, knowing about the money will be very helpful in dealing with it.
“Money is a terrible master but an excellent servant.” P.T. Barnum
Keep your money your servant. The moment you are in a debt trap or you have an extravagant lifestyle which you can’t support, money takes over and it becomes your master.