4 Steps to Take When You Get Your First Salary


Got your first salary? Congratulations. You must be excited, right? You surely deserve applause. After all, now you can earn and spend as you like. You don’t need to depend on the pocket money given by your parents. But wait, have you thought about the financial responsibility that comes with your first paycheck?

First SalaryWith money, there come responsibilities. Planning your finances from the start will ensure that you benefit from the power of compounding. Get habituated with financial discipline from the time you draw your first salary. Take the following financial steps to reach your money goals in life:

First Step: Start a SIP

Set a certain portion of your salary aside and regularly invest via SIP. A systematic Investment Plan (SIP) is a small amount invested at a pre-determined date every month into specific mutual funds. With SIP, you don’t need a huge chunk of money, and even a small investment can generate huge returns in the long run, provided you invest it in a right direction.


As you will make a systematic investment regularly, you don’t need to time your entry into the market. With SIP investment, you can enter the market at any point in time. People with limited market knowledge should go for SIP. Since you can start a SIP investment with an amount as small as Rs 500, it is easy to manage it along with your current expenses. Thanks to the power of compounding, an early SIP investment can generate a huge corpus in the long run. For instance, if you start investing Rs 1000 every month from your 22nd birthday, you would accumulate Rs 18.46 lakh by the age of 50, assuming the rate of return as 10%. However, if you start investing from the age of 25, you would accumulate only Rs 13.38 lakh by 50.

Second Step: Build the right set of the insurance portfolio

Make sure to add the right set of insurance policies to your kitty. When you are young, you may not foresee the health issues that may arise in the future. But medical emergencies arise without prior notice. If you don’t have a health insurance policy, you will have to pay a huge chunk of money from your pocket.

Also, you should consider buying other insurance policies, like term insurance, personal accident insurance, etc. During the initial years of your career, you might have many liabilities like vehicle loans, credit card bills, etc. If your parents have taken a student loan for your education, you can repay it from your salary. Buying these insurance policies will help your family financially in case of your unfortunate demise.

Further, getting insurance early in your life allows you to pay lesser premiums and enjoy wide coverage compared to purchasing the policy during later years.

Third Step: Create an emergency fund

An emergency is an unexpected event that can arise anytime to cause financial and emotional distress. So, create an emergency fund and divert a certain portion of your monthly income towards it.

As per experts, your emergency fund should have funds equivalent to six months of your salary. Make sure to park the money in the right places where you can get both liquidity and growth. You can invest in liquid funds, which grow your money and allow you to withdraw money at the time of need. You can also put the money in a short-term debt fund, which is easily accessible.

Fourth Step: Avoid Debt Trap

As you have just started earning, you are probably the most vulnerable regarding debt traps. With limited and new-found responsibilities, you might find it hard to curb your spending urges. However, it is the right time to understand the differences between needs, wants and greed, and take the right step accordingly. Stay away from debt, including credit cards, personal loans, etc., as much as possible. After all, it is not free money, and you would have to repay it in the future. So, act diligently.

To sum up, it is imperative to make judicious use of the money you earn, right from your first job, to make a financially secure future.