Congratulations! You either have started your first job and expect the salary in couple of weeks OR have just received the salary. Either way; one thing is sure that you are now on earning money trajectory. For many, in fact for most of us, it’s a dream to start earning as soon as possible. Money might not be everything in life but it sure does help you to get almost everything in life.
Since you are reading this article, it’s your curiosity to know how to spend first salary? I was at your situation a decade ago and trust me I had only one thing in my mind rather in heart; “I will give my entire salary to my mother”. That’s probably the thought of many kids. I neither thought anything else nor did was anyone there to guide me. Yes, my boss too had plans; he wanted me to gift him a branded shirt with my first salary of Rs 9000.
I must appreciate you for actively looking out for best ways to spend first salary. You must be having some plans and do fulfill as many of them possible. I won’t even stop you from throwing a lavish party for your friends or splurging on some luxury. Even if I do, you probably won’t listen 🙂
Whatever you do with your first salary; spare just Rs 1081, for me, of course not, for yourself 🙂
Suggesting them as they come at a very low cost which most of us could afford easily. Something is better than nothing, you know already. I have a bigger objective of these suggestions. When you actually opt for these schemes, you not only secure yourself and your family against the risks but educate yourself too. It helps you get disciplined about your finances as well as professional growth. You will explore more and find that this is just the tip of iceberg and there is more to professional and personal life. Constant learning and financial independence is going to bring you a fulfilling life.
Lets see how we are going to spend or invest on 3 critical things; Risk, Savings cum Investment and Learning:
MANAGING RISK of life and accident.
- Get Life Insurance Cover
Life Insurance provides a financial support to your family in case of your death. It may sound very straight and inconvenient to you but that’s one of the harshest realities of our lives; death is uncertain, it can come any day, any moment. Experts suggest one to have cover of over 10 to 20 times of your annual income. So in case your annual income is Rs 5 lac, you should take insurance cover of Rs 50 lac to 1 crore.
There are conventional endowment plans of companies like LIC wherein you get some lump sum amount on maturity. These plans look attractive as they are perceived to provide life cover as well as savings too. But if you look at the returns they provide, you will find them expensive. Second option is term plan wherein you get big life cover at smaller premium. In case of death of insured, nominee(s) get sum assured. But on maturity you get nothing.
Premium charges depend on several factors like age, whether you are a smoker, your health etc. I recommend you explore more about it but while you are doing it, you opt for Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) scheme at just Rs 330.
- Age at Entry Minimum: 18 years (Age last birthday)
- Maximum: 50 years (Age nearest birthday)
- Maximum Maturity Age: 55 years (Age nearest birthday)
- Policy Term: One year renewable
- Sum Assured: Rs. 200,000 (Two lakhs only)
- Premium Amounts: Rs. 330 /- (Exclusive of Service tax* and inclusive of Rs. 41 towards administrative charges of participating banks).
- Lien Period: 45 days from the date of enrollment into the scheme (entry date/date of commencement of insurance cover)
*Service Tax./ Cess/ GST (currently only in case of J&K residents) and/ or any other statutory levy/ duty/ surcharge will be applicable on your premiums, as notified by the Central and/or State Government from time to time as per the provisions of the prevalent tax laws
- Get Accidental Cover
In your day to day life you are prone to meet with accidents which may cause partial or full disability and in worst case death. These accidents can occur anywhere, at your home, office, factory, road etc. You never know where else. Indian roads are notorious for accidents. An interesting ad of Tyre Company says “Indian roads are full of idiots”. To protect against the financial losses due to accident, Indian government has launched (Pradhan Mantri Suraksha Bima Yojana) at just Rs 12 annual premium. That’s not even peanuts! And you get cover of upto Rs 2 lakhs.
Pradhan Mantri Suraksha Bima Yojana is available to people between 18 and 70 years of age with bank accounts at an annual premium of ₹12. The amount will be automatically debited from the account. The accident insurance scheme will have one year cover from June 1 to May but all Bank account holders can avail this facility through their net-banking service facility at any time of the year.
In case of accidental death or disability, the payment to the nominee will as per following provision:
- Death or Full disability : ₹2 lakh
- Partial Permanent Disability ₹1 lakh.
Note: Full disability has been defined as loss of use in both eyes, hands or feet.
Partial Permanent disability has been defined as loss of use in one eye, hand or foot.
SAVINGS CUM INVESTMENT
- Open a PPF Account
In case your employer is not providing EPF (Employee Provident Fund) benefits, you should opt for Public Provident Fund. It has several benefits of savings as well as income tax rebates as well.
- Deposits can be made in lump-sum or in 12 installments.
- Can be opened in post office and notified banks; most of PSU Banks and Private Banks have this facility.
- Maturity period is 15 years but the same can be extended within one year of maturity for further 5 years and so on. Premature closure is not allowed before 15 years.
- Maturity value can be retained without extension and without further deposits also.
- Deposits qualify for deduction from income under Sec. 80C of IT Act.
- Interest is completely tax-free. From 1.04.2017, interest rate is 7.9% per annum (compounded yearly).
- You get the benefits of compounding.
- Withdrawal is permissible every year from 7th financial year from the year of opening account.
- Loan facility available from 3rd financial year.
Initially, you can start a PPF account with just Rs 500. This amount should be increased depending on your income and savings. There are several other investment options which may earn you higher returns but risk too is involved.
- Read Winning by Jack Welch
Whether you are a working professional or run a business, this book Winning By legendary Former CEO of GE is your handbook of success and winning at whatever position you hold and whatever you do. This book helps you in figuring out how a business is run and how different components work. How to hire people and when to let them go? How to keep growing within the company and move out gracefully when needed and what not? This is one of the most practical books for professionals that I have read. Keep it with you always and read it at you own pace. I have read it several times at a stretch and than in bits and pieces. Whenever I am facing any dilemma or issue professionally, I pick this book and it has never disappointed me. I have always found the answer or solution to issue at hand.
You can buy this book online or a book store near you at Rs 239 (approx).
These four things I recommend you to spend your first salary on. This is just a small beginning and suggested considering everyone however low their salary is could get benefits. One more critical risk is medical expenses; one should have adequate Health Insurance to cover medical expenses. If you neither have Health Insurance nor does your employer provide it, you must get Health Insurance for self and dependents. If you have money for it, get a Health Insurance in first month of job only, if not, you may get one from next month’s salary.
The life and accident cover provided with above plans are good but may not be enough for everyone. I reiterate that I have suggested them as they are come at a very low cost which most of us could afford easily. Something is better than nothing, you know. I have a bigger objective of these suggestions. When you actually opt for these schemes, you not only secure yourself and your family against the risks but educate yourself too. It helps you get disciplined about your finances as well as professional growth. You will explore more and find that this is just the tip of iceberg and there is more to professional and personal life. Constant learning and financial independence is going to bring you a fulfilling life.
Wish you all the best for a fulfilling professional and personal life. Please do share your queries, feedback, suggestion etc in comment section. You may also opt for newsletter to get regular updates of life enhancing articles.
Disclaimer: Information shared here is based on our own experiences and have been picked from what is available in public domain. One must validate and ask for more details from Banks or companies before availing these schemes.