Whether it’s first or not, a salary credit always amuses us all.No matter the amount of salary, one should always have a plan of how the salary is put to use. If you overspend, then the best way is to use the formula of ‘Income Less Savings equals Expenses’ instead of the reverse. This method will always help you cut on unnecessary costs and save more.
Here are the five things that one should do with their salary
A life of freedom is a life fully lived. Debt and financial obligations can make you live a life of constraints and stress. Unless it is a home loan, pay off any other high interest-bearing loans like student loan, credit card debts or personal loans as soon as possible.
These loans charge high-interest rates and eat up your savings. First, set aside the instalment amount of your loans from your salary. In case you have surplus funds to make early repayment of loans, please go ahead and pay off your debt as soon as possible. Your future self will thank you for doing this.
Once you have cleared your monthly loan obligations, make sure you have an emergency fund in place. An emergency fund means an amount equivalent to your monthly expenses of 6 to 12 months to be saved in a liquid asset like fixed deposits or debt mutual funds.
Investment for emergency corpus should be made in low-risk fixed income instruments. The investments in these funds should be liquid for easy withdrawal.
The next step is to see if you and your family are adequately covered for health insurance. Also, to avoid any mismanagement of finances in a month of insurance premium payment, you can allocate some amount every month for your premium and set it aside. If your family is dependent on you, you must have life insurance to secure your family.
So you may have heard this statement a million times from your parents or friends telling you to start investing. But once you see how your wealth grows with the magic of compounding, you will not want to stop. The earlier you start your investments, the merrier it will get overtime.
Long-term investments offer better returns as they will not get primarily affected by short term market fluctuations. If you are a beginner, start learning about investment, diversification and the power of compounding.
Take hold of your finances and make logical and wise decisions. Do not let greed or easy money lure you; this saying remains true even in the investment world’ Rome was not built in a day. In the same way, do not expect quick and easy money.
Usually, we get so engrossed in our monotonous lives that we forget to pursue our hobbies. Allot some amount for the things you love to do like travelling, learning music, art, cooking, or simply treating yourself at a fancy restaurant.
But mind that these expenses should be made only after paying off EMIs or any other debt obligations, expenses, medical insurance premium, investment for an emergency fund, investment for short-term and long-term goals, etc.
Planning how you will allocate your salary beforehand will make your life and finances sorted. Initially, it would feel like a lot of work to do, but the benefits it will reap will outweigh the time invested.
Thanks for reading!