Best Salary Management Tips for Beginners

Fresh out of college? Just started with your first job? Don’t know what to do with your salary? Confused on how much to save and how much to spend? What to buy and what not to? Here is what you can do.

Money Management @ Sbrt writes

It is quite common for the young graduates to spend lavishly. This comes in mostly because they have the excitement of earning their own money coupled with the fact that they are independent to decide upon what to do with the money. Below are some umbrella guidelines that can be followed by anyone no matter what package you have grasped in your first job.

Payoff any outstanding study loan

Any outstanding loan is not good. Loans should be taken when in real need and must be paid off as soon as possible. You may set up a monthly auto debit plan. You may yourself decide the amount you wish to be debited. Just remember, too low an amount will increase the number of instalments and hence the interest you end up paying. Too high would leave you with nothing to spend elsewhere. So, you must decide wisely.

 Build up an Emergency fund

An emergency fund as the name suggests, is a fund that you store for crisis situations. It may be medical emergencies, financial emergencies or social emergencies. This fund will also help in cases where you land up without any job for a couple of months till the time you find another one. I would recommend the corpus to be equal to 6-8 months of your monthly in-hand salary.It is very important to have an emergency fund. 

 Build a Saving fund (Urgent fund) (OPTIONAL)

Build up another fund which would be of the amount of your 3-4 month in-hand salary. This fund can be used for important and urgent (But not emergencies) needs. If you feel your salary is too low, this can be treated as optional until the time your salary increases and you are comfortable taking up this option.

  Splitting up of the salary

Once you are done building up your emergency fund, you should consider splitting up your salary into three parts (not necessarily equal but recommended):

    First part – Expenses

      Use it for your regular expenses, daily needs, rent and bills, birthday gifts, family expenses, etc. This is the part to be used to enjoy and have fun. After all you deserve to treat yourself well… after all it’s your hard earned money!!

  Second part -Self Investment

      Keep it on investment on self. You may invest in things like doing some courses that might help you in your career and enhance your knowledge. Or you may travel and invest on experiences. Basically this fund is for investment on self for enhancement of oneself.

   Third part- Monetary Investment

      Use this part for investments that give you financial returns. You may choose to invest in shares, mutual funds, recurring deposits, bonds, etc. depending upon your needs and risk appetite.

Earning money at an early age is a great thing but you need to be careful not to get drawn away in the wrong direction. If you do, you might end up creating more liabilities than you could afford. Planning is of utmost importance for finances and if you plan, sooner or later you shall achieve what you wish to.

All the best managing your money!