8 financial saving tips a new employee must know

Starting a new job is an exciting phase in one’s life. Receiving that first pay check as a new employee can provide a taste of financial freedom like never before. However, instead of splurging, young professionals should consider their first salary as a stepping stone to financial well-being. This is a time for financial planning that can pave the way for a healthy future.

Let’s look at the eight essential financial saving tips for new employees:

• Table of contents

1. Plan a monthly budget
2. Build an emergency fund
3. Invest in mutual funds
4. Retirement planning
5. Avoid the debt trap
6. Negotiate a good salary
7. Maximise tax savings
8. Learn and adapt

1. Plan a monthly budget

The first step towards good financial health is to track your earnings and expenses. As a new employee, you must differentiate between 'wants' and 'needs'. Listing down monthly expenses, categorizing them, and setting aside funds for each can prevent overspending. Additionally, having a dedicated portion for savings in your budget ensures you don't spend all you earn.

2. Build an emergency fund

Whether it's an unexpected medical issue, sudden job loss, or an urgent home repair – unforeseen events can jolt your financial stability. An emergency fund can act as a cushion during such times. Therefore, new employees should aim to save at least three to six months’ worth of expenses in a liquid fund or savings account to handle emergencies.

3. Invest in mutual funds

Investing in mutual funds allows your money to work for you. A mutual fund pools money from several investors to buy a diverse portfolio of securities. This diversification reduces risk, and with expert fund managers at work, your money is in capable hands. There is no barrier to entry, and you can start investing with even a small amount. Over time, the power of compounding can potentially turn your mutual fund investment into a significant sum.

4. Retirement planning

Retirement might seem far away, but the sooner you begin saving for it, the better off you will be. Given the increasing life expectancy and inflation rates, having a substantial retirement fund ensures that you lead a comfortable life even after you stop earning.

5. Avoid the debt trap

If you have loans or credit card dues, create a repayment plan. Loans, especially those with high interest, can quickly become burdensome. Consistently paying off debts not only lightens your financial load but also improves your credit score, which can be beneficial for future financial undertakings.

6. Negotiate a good salary

Your starting salary sets a precedent for future increments. Research industry standards for your role and be prepared to negotiate your worth during interviews or appraisal discussions. A higher salary directly translates to higher savings and investments.

7.Maximise tax savings

A significant portion of your income can go towards taxes. However, with proper planning and investing in tax-saving instruments like ELSS or using sections like 80C for deductions, you can legally minimize your tax outflow. It’s not just about earning but also about retaining as much of those earnings as possible.

8. Learn and adapt

The world of finance is always evolving. Regularly updating yourself about changes in the market, new investment options, and evolving tax norms ensures that you always make informed financial decisions. Being proactive and adapting to these changes can have a positive impact on growing your wealth.

Conclusion

Stepping into the professional world opens up numerous possibilities, both in terms of your career and your future financial prospects. How new employees approach savings and investments in their initial working years can shape their financial future. By understanding the importance of retirement planning, creating an emergency fund, mutual fund investments, and various tax-saving measures – new employees can give themselves a head start on the path to financial stability. However, it is always wise to consult a financial advisor before making any investment decisions.

FAQs:

What percentage of my salary should I allocate to savings as a new employee?
Aim to save at least 20% of your income and gradually increase it as your financial situation improves. But check with a financial advisor on this.

How can I build a credit history from scratch?
You can get a credit card, use it responsibly, and pay bills on time. This helps establish a credit history.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals, and horizon. This information is subject to change without any prior notice.