Five Things You Should Do with Your First Pay Cheque

• The first pay cheque is always special. Plan well to ensure you do all the right things
• Focus on inculcating a savings habit but don’t forget to indulge yourself
• PPF and equity mutual funds are good starting points for those in their early 20s
• If you want to give your parents a gift, health insurance may be a sensible choice

The first pay cheque is always special. It gives you a sense of achievement after spending your parent’s money for so many years. After seeing those magic words “your salary has been credited…”, you realise the worth of spending so many years on your studies. It gives a sense of comfort and achievement. This is the emotional aspect of this. But apart from the emotional aspect, there are other important things that you need to do to ensure you build healthy right financial habits right from the beginning. Striking a balance between the two can achieve the best results.

Treat Yourself

The first thing you should do is to treat yourself and pat your back for your achievement. Buy the little things which you always wanted to have and thought you would get “once I start earning”. The moment is here. Saving is important but let a little bit of emotion cloud your decision at the moment as you have worked hard to achieve this first milestone. However, don’t go overboard and settle for little joys that you can afford to pay for.

Start Repaying Your Debt

When you start earning you may get emotional and start splurging your earnings on things which you do not need or can’t really afford. Instead, look at your existing debt. If you have taken any loan for your education, start repaying it. Debt is dear, so repay it at the earliest, whether it is a bank education loan or a loan from friends or family.

Buy Health Insurance

Insurance premiums go up as per your age.  Typically, when people start their careers, they are in the age group of 22-25. At this age, you can buy an insurance plan for yourself at a cheaper cost. You can also gift health insurance to your parents. That will give you extra tax deduction under Section 80D of the Income-tax Act, 1961, and will be an expression of love and care for them.

Open A PPF Account

Saving is important for your future. To begin with, you can open a Public Provident Fund (PPF) account with a bank or post office. It is a good way to inculcate savings habit. PPF helps you create long-term wealth in a secured manner. You can also take advantage of tax deductions under Section 80C. You can invest a maximum of Rs 1.5 lakh and a minimum of Rs 500 per year in PPF, which has a login of five years.

Start Investing

During this stage of your life, since you are likely to be without major responsibilities or liabilities, you can take risks with your investment. Equity mutual funds entail risk but it is advisable to start investing in them early to reap the benefit of power of compounding later. With a mutual fund, you can invest even amounts as less as Rs 500 every month through a systematic investment plan (SIP). You can choose to invest in equity-linked savings schemes (ELSS) that also offer tax deduction benefit apart from offering the equity advantage.

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