LIFE LESSONS

5 Things I wish I knew when I got my first job!

I got my first job about almost 3 years ago, here’s the list of things I wish I knew!

It’s related to the key thing that most of us or at-least I took very lightly until one fine month when I ended up spending all the money and was broke at the beginning of the month, I couldn’t recall where I spent all my money and I had no emergency funds of any sorts or anything.

That’s when I made one of the worst decisions in my life ever, I took the pay later option which is a very fancy word for loan or credit.

I was ashamed to ask my parents or friends and this looked like a great option but trust me it made me realize how careless I was when it comes to money.

That is when I researched and made some decisions and learnt about Finance 101

Let’s take baby steps and start small. The two most important words you have to remember “START” and “SMALL”.

Before we get on the to-do’s you have to understand one term which is most important that anything else, it’s called inflation — Inflation is the rate of rise in the general level of prices. It is measured by the changing cost over time of a “basket of goods and services” for a typical household.

In simple terms let’s say x product costs you Rs 100, the same product will cost you Rs 110 the next year, meaning there’s a 10% increase in prices. In India the inflation rate is around 8–10%.

Here are the key things that everyone should start doing in their 20's.

1. Budgeting — If you’re earning or started to earn, start budgeting your salary, this was the first and probably the worst mistake I ever did, I didn’t budget my money, I randomly kept spending without tracking and figuring out where I was spending. So here’s what everyone has to do, budget so simple yet most of us just ignore it like we ignore people’s free advice :P.
   So here’s how I do my budget, you can follow the same or customize it based on your needs :
   Needs (Monthly expenses which are mandatory Ex — Grocery, Internet Bills, Cafe/Restaurant Expenses, Gym subscription, Netflix & Spotify Subscription etc .)— 20%
   Wants ( Things that you want to buy but are not mandatory like new phone or new RC Car, Batman figurines etc) — 10%
   Emergency Funds (Only use this funds if and only if there’s an emergency, for example some medical emergency or something very serious) — 20%
   Investments (Mutual Funds, Stocks, and any Instrument that grows your money but not FD)—50%
2. Insurance — At first like most of the population, I thought Insurance was a scam and it was useless do it and waste of money and it’s not worth investing there but it took me a year to understand how important and useful insurance can be. Unless you have enough money or there’s other person in your family who also earns then maybe it’s not that important but if you’re someone like me and my whole family depends on me then it’s important to get a Term Insurance.
   During COVID and looking at people dying, I couldn’t sleep because I was shit scared What happens if I die? my family depends on me, what will they do and all this anxiety started build up and that’s when I learned about insurance and it’s value. Sure Insurance companies are u=taking advantage of your fear or something but trust me it’s valuable.
   So I got my self a Term Insurance which is a pure Life Insurance, Insurance should always be seen as an Expense and not an Investment, Like the Insurance you get for your vehicle you pay it but don’t expect anything unless it meets the insurance terms. The same should be done with life and Term Insurance is the best and inexpensive Insurance you’ll ever get, fuck other plans like endowment or payback. Again most important point to remember is Insurance is an Expense and not an Investment. It’s like an umbrella until you build your shelter.
   What I mean by that is, Term Insurance says that you pay x amount as premium for x years and your life is insured for x years and for x amount. If in-case you die, then your family gets the cover amount but if you don’t die within the term period then your money that you gave the insurance company is gone. That’s why it’s an expense.
   Here’s what I would suggest get a term plan for a cover of CTC x 21. If your Annual CTC is 5LPA get a cover of 1Cr that would cost you nearly 1K per month for 30–40 years and take the time period as 60–65 years. By then you should be financially stable and you shouldn’t need insurance.
   Remember umbrella — That’s what I meant.
   This was about life insurance, also get an health insurance because I’ve seen families lose all their saving when they had their health crisis.
   Indian Govt. introduced a law which states that if insurance premium paid for 3 years then the Insurance company can’t deny the claim on any grounds. Read here.
   BTW now I sleep like a baby!
3. Investment — If you’re young, let’s say in your 20’s or 30’s and unmarried then you have certain capacity to take risks. Start investing in Mutual Funds, preferable Equity and long term, it’s risky but worth it and you can afford it and please don’t invest in FD’s and RD’s. it’s safe to invest there but for the returns that you get it’s not worthy. Inflation rate in India is about 8–10% and Bank Savings/FD/RD provide about max 6% of interest which means even though you’re getting more that what you invested a year ago but the value is not the same due to inflation.
   Try to Invest in hybrid or equity mutual funds, on an lower average the returns is about 15–20% it’s the lowest on higher average you get about 20–30% or more depending on the type of fund and market. Which means with inflation you’ll still make 10% more.
4. Emergency Funds — Always keeps aside some part of your earning as emergency fund, so that in times of need and emergency you don’t have to beg or ask someone else. I have learnt this the hard way and trust me it’s a valuable thing to do. A good rule of thumb is have a minimum of 5 to 8 times the expenses per month.
   During COVID we have seen people losing jobs and not getting jobs for months, It’s good if you have emergency funds so that you can survive next 5–8 months without salary.
5. FOLLOW — Last and most important this is to follow these. Decide a budget and follow it religiously. Don’t overspend a penny more that what you’ve decided for your budget.
   Stick to it!
   Discipline = Freedom!
   Financial Discipline = Financial Freedom!

Also FYI — I’m not a financial advisor but I think these are important things that our education system hasn’t taught us and I’m just spreading awareness.

For more info do read this amazing wiki written by amazing people on reddit — https://www.indiainvestments.wiki