Smart Money Moves
for New Women
Earners

Your first pay cheque is a moment of immense joy. It fills you with a sense of pride and in a way give you the freedom you always wanted. While there’s nothing wrong in indulging your desires and splurging on your immediate needs, financial prudence calls for learning the art of money management to realise bigger life goals.

So, what approach should you take if you have just joined the workforce and have embarked on your journey to financial freedom? Let’s find out.

Formulate a Budget to Start Saving

A well-rounded budget helps you be in command of your finances and enables you to save. Even if your income is low, you must try to save at least 20% of it by cutting down on unnecessary expenses. This habit will go a long way in ensuring fiscal discipline, an essential for wealth creation.

A good way to start is by following the 50-30-20 rule. As per it, you must spend 50% of your income on needs, 30% on wants and save the remaining 20%. You can follow this rule, irrespective of your income.

Also, if you are staying with your parents, you could be saving more than 30% of your income as there are no established costs. At the same time, given the current state of affairs, you must try to save as much as possible.

Staggered Investments in Equities

A calibrated approach in equity investment is necessary to build wealth for long-term goals such as marriage and retirement, among others. From the several asset classes, equities have the potential to deliver inflation-beating returns in the long run. What it means is that equities offer real returns, up and above inflation.

A wise method to kick-start equity investment are through systematic investment plan (SIP) from mutual funds. Here, a fixed amount is deducted and invested in the chosen fund at a pre-defined interval. It imbibes a disciplined savings habit and helps you build wealth in a sustained manner. You can start a SIP from as little as ₹ 500 per month and increase it later with a rise in income.

A SIP of ₹ 1,000 per month offering annualised returns of 12% in a fund for 10 years can help you garner a corpus of nearly ₹ 2.3 lakh.

Build an Emergency Corpus

While financial advisors have always advocated the need to have an emergency fund, recent events have proved how essential it is to actually have it. The emergency corpus will help you sail through a crisis such as job loss and help you meet crucial commitments such as paying off education loans.

Note that if you miss any loan EMIs, the same will affect your credit score. The emergency corpus will help you meet day-to-day expenses and also address essential commitments. Park money in liquid funds or bank fixed deposit to build this all-important corpus.

Plan Taxes

Money saved in taxes is equivalent to money earned. You must invest in instruments that offer tax benefits and also help you reach your financial goals. For instance, if you want to build wealth by investing in equities and lower your tax liability at the same time, equity-linked savings scheme (ELSS) is your best bet.

Investments in ELSS qualify for tax deduction under section 80C of the Income Tax Act, 1961. If you are looking to invest in debt instruments, PPF, tax-saving bank fixed deposit, national savings certificate (NSC) should be on your radar.

Amid all these, it’s vital not to forget retirement planning. Plan for this all-essential goal from the day you start earning and start investing in instruments such as the National Pension System (NPS) to build a sizable retirement corpus so that you live your golden years stress-free.