So, you put in the hard yards, ace exams in college, face grinding interviews and, finally, land your first job. Reason enough to celebrate; but wait, getting a new job should not make you go on a spending binge and blow away almost your entire salary. Also don’t deprive yourself of well-earned rewards by not buying things you like.

However, in your desire to indulge, don’t lose sight of your finances; balance your investments prudently.

Taking cover

After you receive salaries for the first few months, don’t rush to invest massive amounts or spend everything. This will create liquidity problems for you at the end of the month.

Draw a budget of your expenses. Include student loan EMI, if any, rent, household expenditure, amounts sent to parents and transportation costs. To the extent possible, keep a check on the number of times you eat out, expensive excursions with colleagues or costly movie tickets during weekends.

For the first few months, observe how your monthly expenditure pans out before taking concrete financial decisions. For starters, try to save at least 5-10 per cent of your salary. Before starting any investment, first take a term cover — more so, if you have dependent parents. You must take a term policy for at least 10 times your annual salary, and step it up as you age, marry, have children, change jobs for higher salaries etc.

The next step is to take a health insurance policy. If your company offers you a group cover, where you are allowed to add your parent as well, do so. Group insurance policies are cheaper than regular ones and coverage would start immediately after premium payment. If possible, take a medical policy separately from an insurer, so that even when you switch jobs, your cover remains.

Starting investments

When your monthly budget stabilises and you buy the covers, you can consider investments. Typically, investments are made for achieving specific goals — marriage, buying vehicles, overseas vacation, retirement, and so on.

How and where you invest would depend on your risk-appetite and time horizon for a goal. If you are averse to market volatility, you can start investing in recurring deposits, public provident fund or increase your voluntary PF contribution, VPF.

But if you can take risks, especially if parents aren’t dependent on your income, you can consider mutual funds.

Starters can go for balanced funds (which invest in debt and equity) and large-cap schemes (that invest in large, well-known companies).

While investing in equity funds, you must only set aside sums that you would not need for the next three to five years at least. This is to ensure that the amounts stay invested and earn above-average returns. Resist the temptation of dipping into these investments for your monthly requirements.

Tax benefits are important. But do not let these benefits alone dictate your investment choices. Do not fall for the temptation of buying traditional insurance policies.

For one, the returns from endowment policies are very low. Also, the life cover is low and the cost structure high. Do not confuse insurance with investments.

Checking credit

You can opt for a credit card; of course, if you can get by with your debit card alone, then nothing like it.

Having a credit card allows you to have more liquidity and gives you some leeway to spend during emergencies.

But ensure that you do not spend more than 40-50 per cent of the credit limit available.

Adhere to this rule religiously, and assume that you have only half the sanctioned level available for use.

Pay the full amount and not the minimum sum. Else, you will end up paying high interest rates on your outstanding amount. Keep automated reminders on your phone so that you do not miss the date for paying your card dues.

Avoid rushing to buy a house or property early on or even an expensive four-wheeler with loans.

Finally, build a contingency fund equal to six months’ expenses. You can start saving for this fund a year or so after you start on your job.

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