Earning money of their own for the very first time can be both exciting and overwhelming for a person. Starting the first job would take a person a step closer to financial independence. As Kavan Choksi mentions, the feeling of earning an income of their own may provide a person with an adrenaline rush to splurge, but they also should be smart and systematic about managing their finances at this stage. The earlier one learns how to manage their money, the more sorted would their financial life become down the line.
Kavan Choksi offers valuable tips on handling the finances after landing the first job
Managing finances after landing the first job is an essential step toward building a strong financial foundation. It is important to develop good habits early on to ensure long-term financial stability. Here are some of the best financial moves one can make after getting their first job:
- Create a budget: Creating a budget is important for keeping the track of money and orderly identifying spending in varied categories like rent, gas, utilities, groceries, and entertainment. Without a proper budget in place, one would have a high risk of overspending. There are many types of budgeting methods one may follow, the 50-30-20 rule being among the simplest options. As per this rule, 50% of the income should go toward needs, 30% towards wants, and 20% toward savings.
- Start an emergency fund: Much like the Covid-19 pandemic and its aftermath has shown, advanced preparations are quite important in navigating the inevitable ups and downs of life. One of the best ways to do so is to create an emergency fund. It is best to start putting money in this fund from the first salary itself. People should ideally set aside enough money to cover their expenses in case they face a medical emergency, need to pay for sudden car repairs, and so on. A basic emergency fund must have enough to pay the living expenses for a couple of months.
- Pay off any debts: In case one has any high-interest student loan or credit card debt, they should try to pay it off as early as possible. It would be a good idea to curtail the expenses that can be delayed and pay off the loan obligations first. The longer one takes to pay off their loan, the more would they have to pay as an interest for the loan. If a person uses credit cards, they should keep the credit limit as low as possible to avoid unnecessary spending. Credit cards can provide to be a good way to build a good credit score. However, if a person overuses the card and delays credit card payments, then they may make their financial situation worse.
As Kavan Choksi says, financial literacy is an ongoing process, and one should take advantage of online resources, books, podcasts, and more to improve their understanding of personal finance. As one improves their knowledge, they shall be better equipped to make informed financial decisions. By adopting healthy financial habits early on, one would be able to ensure a strong financial future.