First Job? Here are the some financial Tips for your First Job.

Have you thought about it that your first job is a very important milestone in one’s Life- No longer you’re a student but you are earning and with it comes financial Freedom. However, it is important to keep in mind that this is only the first step towards financial planning and meeting your goals and dreams.

Planning your finances from the time you start earning will ensure that your savings benefit from the power of compounding.

For Example: If a 25 years old saves Rs.5000 per month at interest 10%. Then will earn around 1 cr in mid Fifties.

On the other hand, if one starts savings Rs. 5,000 a month at 30 years (with the same 10% interest), the corpus after 30 years will be only Rs. 60 lakhs.

Hence, it is advisable to start allocating money towards savings & investments as early as possible

The first step to your financial plan is to prepare a budget based on both current and expected income and expenses. It is very important to understand and monitor one’s cash flows, i.e. from where the cash comes in and where it gets expended

1. Take stock of your student loans.

First things first: If you have student loans, you aren’t doing yourself any favors by waiting to see if your lender notices you’ve graduated.

Some loans have what’s called a “grace period ,” or a six-month gap after you’re finished with your education, ostensibly to allow you to set up an income. The thing about grace periods, though, is that interest continues to accumulate – so if you can start making payments immediately, it can ultimately save you money.

2. Get an idea of your Cash Flow

If you are making 400000 lakhs a month you aren’t depositing Rs 6000 a month into your bank accounts. Most people have taxes, some retirement contributions (more on that later), and insurance payments taken from their paycheck before they ever see it.

That’s the money coming in. But what about the money going out?

The other half of your cash flow is the money you’re spending, and with apps Like Financial Freedom application which allow you to connect all of your accounts and keep track of the activity for you, keeping an eye on your outflow is easier than ever. As long as you’re bringing in an amount equal to or more than you’re spending, you should be able to stay out of debt.

3. Inflation:

Where compounding helps, Inflation doesn’t. Things become expensive overtime due to many reasons. This rise in prices of essential commodities is called inflation.

Now, how fast your money grows, in relation to inflation is what determines how your wealth grows.

Your money loses value over time thanks to inflation. So Rs 10,000 invested in January of this year may be worth only Rs 9,200 at the end of the year, if inflation is at 8%.

An investment returning 8% when inflation is 8% is doing nothing but keeping your money where it was.

4 .Create an emergency fund:

Experts believe that you should create an emergency fund that has 3-6 months of expenses. This will help you deal with possible layoffs or unforeseen emergencies. You can put your initial savings in this.

5. Once you have created an emergency fund, list your financial goals:

An emergency fund should be your first goal. After this, list down your goals under long term, short term, and medium term heads. Long term goals can be a house, medium term can be a car, and short term can be a smart phone.

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