Investing your salary wisely
Your first salary is always special. It is something that we have all dreamt about as it finally brings you on the threshold of financial independence. Most of you would remember what you might have done with your first salary. Maybe you bought your parents some gifts, partied with your friends, and even splurged on yourself. However, how many of you apportioned a part of your first salary to an investment?
Probably not many. That’s alright. You can always spend your entire first salary. However, from the second salary onwards you must start investing. After all, true financial independence does not come from earning. It comes from investing the money you earn and growing it over the long-term. As Warren Buffet said, “If you buy things you do not need, soon you will have to sell things you need”.
This might sound grim but there is no reason why things should come to that. All you need to do is save and invest your salary wisely – if you do this right, there will be no need for you to compromise.
Here is a step by step guide to invest your salary wisely
Step 1: Take stock of your expenses: You must always follow the maxim, ‘invest before you spend’. There are some expenses that are an absolute must. These would include money spent on house rent, taxes, groceries, and utilities like phone and electricity bills. Then, there are some expenses that are discretionary in nature, i.e., you don’t have to spend that money. These expenses include money spent on eating out or ordering food online, buying expensive gadgets, splurging on clothes and shoes, etc. Now, while the non-discretionary expenses are a must, it is the discretionary expenses that you can curb. Does that mean that you stop having fun? Not at all.
Step 2: Create a vision board of your goals: The main purpose of saving and investing is to achieve your goals or postpone consumption to a later day. As an individual you might have myriad short-term and long-term goals ranging from going on a vacation to the Maldives to buying a 2BHK in your city. So, go ahead and create a vision board of all your goals. However, if you really want to achieve them, you need to go a step further and create a proper plan. Ask yourself questions like, when do you want to achieve the goal, how much money will you require, how important is the goal, etc.
Step 3: Know how much you want to invest: You already know your monthly salary and the non-discretionary expenses. When you subtract the non-discretionary expenses from your monthly salary, you arrive at an amount that needs to be apportioned between investments and discretionary investments. Depending on your goals and the time frame of your goals, you can choose to invest anything between 15% to 50% of this amount. The balance can be spent on discretionary expenses. This way, you can have your cake and eat it too.
Step 4: Start a Systematic Investment Plan (SIP): An SIP is a great way to start your investing journey. It entails investing a fixed amount of money, on a periodic basis, in an investment instrument of your choice. An SIP inculcates discipline and gives you an opportunity to reap the benefits of rupee cost averaging and the power of compounding. Most importantly, you can start an SIP with as little as Rs. 500. So, there really is no minimum investment hurdle that you need to surmount.
These small steps can ensure that you can really maximise the earnings potential of your salary. However, the first step needs to be taken by you. A great way to start would be by exploring our range of curated portfolios that can meet your multiple requirements and help you on your wealth creation journey.
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