10 Things To Know When You Get Your First Salary

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Getting his first paycheck in his hands is a day Akshay had dreamed of since the first day of engineering college. However, as the day approached, his dreams grew bigger until he planned on buying everything that he had always coveted. His first bike, a pet, a new dress for his mother, a new suit for his father, a bicycle for his younger brother. Akshay had always nurtured philanthropic dreams as well, and wondered if he should start contributing towards his social causes right away as well. As the day approached, however, well-meaning relatives including his parents came up with suggestions on what to do with his first salary. His father spoke insistently of taking up an insurance policy, while his mother provided advice on investing in gold and even mutual funds.

A first salary is every young person’s dream. Receiving the salary credited text message from the bank for the first time is a moment to be cherished for a lifetime. However, there is always a conflict when it comes to how the salary must be spent. While friends will always suggest finishing up tasks on one’s bucket list, older people including parents and extended relatives will always advice on investing and insurance policies. Unit Linked Insurance Plans (ULIPs) have emerged as a great tool for this reason, since they allow for a range of options in terms of funds that can be invested in. With a Bima Advantage Plus Plan, a person gets the benefit of both an insurance as well as an investment plan, at a single price with premiums that can be paid monthly, quarterly, half yearly or even yearly. Since the fund can only be liquidated after a period of five years, it is a good way to ensure mandatory savings.

Here’s a list of the ten things one should know before they start making plans about how to go about spending their first salary.

  1. Compound interest is a powerful tool:
     Starting the investment cycle early ensures maximum compounding of assets, which in turn ensures that maximum returns are generated while investing for the long term. If investments are begun early, achieving goals becomes a speedier process. The benefits of ULIP plans can be long-reaching, since the policy term can be from 10 to 30 years, with plans like the Bima Advantage Plus Plan. If you have been wondering what is ULIP for a long time, now is a good time to find out.
  2. Fewer responsibilities, maximum disposable personal income:
    At the beginning of one’s career, there are fewer dependents to take care of. Thus, disposable personal income is higher, which means that more amount can be saved as compared to when one gets older and has to take care of aging parents, home loans, families, etc. Investment plans also help in tax savings, with ULIP tax benefits being higher than through most investment instruments including mutual funds. The Bima Advantage Plus Plan also allows you the opportunity to switch between six different funds which range from debt funds to equity funds as well as handle a portfolio of balanced assets, thereby assuring maximum security. If “what is ULIP” is a question you have been looking to answer, now is a good time.
  3. Say ‘No’ to buying insurance from friends or family:
    It is essential to be aware of the opportunities available in the market as someone who is earning for the first time, but it is even more essential to say “no” when friends or family offer insurance policies. Such experiences could be detrimental to one’s financial health over the long-term, and it is important to fruitfully invest your money into productive assets. Investing in a ULIP plan is a good way to escape such relatives’ clutches since benefits of ULIP plans are far more out-reaching than any hazardous scheme brought by a relative.
  4. Be aware of investments under Section 80C:
    These investment plans allow for tax exemption and aid in the creation of wealth while also ensuring your investment goals are fulfilled. ULIP tax benefits include exemption under Section 80C, which can be claimed at the time of investment as well as the time of the fund attaining maturity.
  5. Credit cards must not be overused:
    While plastic money is all the rage now, it is essential to not overuse the credit card which only ends up increasing debts and decreasing the credit score. Debit cards are a safer choice of payment, as it helps one stay constantly aware of how much money is being spent and of the balance left. It also does not add to any debts.
  6. Paying off debts:
    With the first salary, one should often head straight for paying off any old debts collected. For instance, many young professionals have a student loan to pay off which needs to be a priority before planning for any expenditures. Having a lower debt burden helps later when one wants to approach the bank for a bigger loan, such as for a home or a vehicle. The credit score will reflect the promptness with which the student loan was paid off, and the individual will be rewarded accordingly.
  7. Goal-based investing is the key to success:
    While investing is a healthy choice in itself, it is important to invest in specific goals where one can judge the results of the investment fast. Benefits of ULIP plans are that one can begin investing with a goal in mind, and then once that goal is achieved, move on to investing in the next goal. With a Bima Advantage Plus Plan, one can even avail partial withdrawals to meet immediate, short-term needs. This helps achieve momentary goals before one begins investing again with a larger goal in mind. ULIP tax benefits make them an excellent choice for goal-based investing, where you can also withdraw funds for meeting short-term goals and for ensuring the long-term goals are also fulfilled. If “what is ULIP” is a question you had been looking to answer, you can begin right away.
  8. It’s important to invest in upgrading skills:
    These days, a college education is very disparate from industrial training and it is important to upgrade one’s skills to stay relevant in the industry. Investing in oneself to increase the levels of skills is important education in itself, and ensures greater value for the next job switch.
  9. Don’t invest blindly in traditional options:
    While parents may have invested in traditional instruments like fixed deposits with banks, it is important to not follow these methods blindly without paying heed to what is best for the individual in question. It is important to weigh the options, consider the pros and cons for each instrument tool and then decide what is best.
  10. Create an emergency corpus:
    An emergency corpus can be like a piggy bank for any emergency, unanticipated needs that might arise. It helps to save some money for a rainy day, when it might be difficult to liquidate funds immediately.

Getting your first salary is a giddy experience, true, but it is important to be prudent right from the beginning. It is important to invest in experiences, and even more important to invest in the future. Benefits of ULIP plans are geared towards the long-term, and this is an excellent investment tool of choice for young professionals drawing their first salary. The Bima Advantage Plus Plan offers a variety of choices in terms of funds that can be invested in, with the option to withdraw these funds at any time at all – thus, allowing for short-term goals to be met as well.