Personal Finance for Freshers
Being a fresher you must be excited about your new job and carrier. You have lot of exciting dreams. You are looking for enough money so that you need not to worry while you spend. Once you have peace of mind, you can enjoy your life. You have goals and to achieve those goals you need money.
Did you learn about personal finance in your school or college? If it was not in your syllabus, how will you manage your personal finance in your daily life?
Personal finance deals with the process of how effectively you can manage your personal and Investment Planning assets. It deals with the income which you generate for your house hold, life style, dependent expenses, insurance premium, loan servicing, savings and investments. Try to understand about your fixed and variable expenses. Your fixed expenses are like rent, loan repayment and variable expenses are food, monthly utility bills etc.
At the beginning you may have limited money but unlimited requirements and for which you must prioritize your goals. You try to differentiate needs and wants. The income we are considering your wages or salary from your job, if you have other income you can add.
Let your money work for you as you work hard to earn money. If you practice to implement the following tips into your personal finance, your Financial Planning for future will be smooth.
Start building a contingency fund. You keep 3-6 months’ salary in your savings bank for emergencies or unexpected expenses. The rationale is that 3-6 months may be enough time to recover from illness that you can recover, you may be temporarily unemployed for which you can make provision.
Insurance. Insure yourself adequately, for life you go for term plan/pure insurance for long term. Go for mediclaim insurance plan, personal accident plan, and critical illness Insurance Planning. Although your employer may cover health insurance but still you take by your own. If you have any dependent and if they don’t have any health insurance, take health insurance for them also.
Pay off your student loan. If you have student loan, repay it on priority basis. These kinds of loans shall eat up your income as the rate of interest is high.
Avoid using of Credit Cards. Being young adult you may be impulsive buyer. Your emotion and feeling play a role in purchasing, you are attracted by well crafted promotional message. Here you need to understand the difference between your needs and wants. Impulse purchasing of costly nonperforming assets (like Car, TV, Refrigerator, costly Gadgets, Holiday etc) create problem in your personal finance. Impulsive buyers use credit cards very frequently and they fall into debt traps. Don’t spend tomorrow’s income today. You pay for your purchase out of income or savings. Remember the quotes of Warren Buffet “If you buy things you don’t need, you’ll soon sell things you need.”
Buy low budget Car. If you need a car, buy low budget car with less maintenance cost which is good in the long run also. You have to make a big down payment and the rest in equated monthly installments. If you take loan, another debt burden will be on you and car loans are costly. Keep the EMI as low as possible.
For buying a house. Buy a house/flat while your life is more stable and you have a clear vision about your future direction. You may find cheap apartment for rent and may postpone buying a house until you are financially stable.
Start Retirement Plan. Although you have enough time but it’s never too early to start planning for your golden years. It’s a good habit and you enjoy the benefit of compound earnings. Since you have plenty of time it’ll not pinch your purse.
Develop a Cash Budget. The objective behind of budget is to generate surplus income. A cash budget helps to control cash inflows and outflows. Its purpose is to balance your income with your expenditures and savings.
I strongly recommend you to set your realistic goals and save between 30 percent and 40 percent of every rupee as soon as you join in your profession, after college. Hopefully these tips are helpful and you need clear vision, right plan and execution of plan.
Disclaimer: This article is written by me and is my own original creation. If there is any claim to the contrary, I am solely responsible and I indemnify The Financial Planner’s Guild, India (FPGI) and any other publication that carries my article.