There are certain things that you should do as soon as you start your career – things that would make your financial life simple going forward. Here is a list of the 5 most important things.
Congratulations – you have just finished your education, and are starting on your first job! Understandably, it is time for celebration.
There are certain things you can do at the very beginning of your career that would set the ball rolling for a healthy financial life.
1. Apply for a PAN card
Most earning people have to file an income tax return (ITR), and an essential element for that is a Permanent Account Number (PAN).
PAN is a unique number assigned to you by the department of income tax, and is mandatory for filing tax returns. But it is also becoming increasingly necessary for most medium-to-large transactions – like purchase of a car, a house, etc.
So the earlier you get it, the better it is!
Also read:
- What is a Permanent Account Number (PAN), who needs it and how to get it
- Income Tax (IT) Return Filing – Which ITR form to use
2. Purchase adequate life insurance
Now that you have started earning, take a moment and see if there is anyone dependent on your financially.
Are you paying your parents’ rent? Is your brother’s education your responsibility? Are you financially responsible for taking care of your sibling’s marriage?
If yes, you need insurance – it would provide a financial cushion to your dependents in the case of your untimely death. So purchase life insurance soon. And remember to buy only term insurance – stay away from fancy things like Unit Linked Insurance Plans (ULIP).
Also read:
- Life after life – Why you should buy Life Insurance
- “Term policy” (term insurance) is the best policy
- Are ULIPs a costly form of term insurance plus MF investments
3. Start Systematic Investment Plans (SIP) in a good Mutual Fund (MF) scheme
You are young, and most of your financial goals would be some time away. So, you have time on your side: start investing now, and gain from compounding. Even small amounts saved regularly can provide you with a huge corpus later – provided you start investing early.
And there is no better way to invest for the long term than investing in equities! So start SIPs in a few good MF schemes right away, and start investing in a disciplined way.
Also read:
- Goal Based Investing
- Start saving early and gain from Compounding – Early bird gets the worm
- Systematic Investment Plan (SIP) – A rupee a day, keeps worries away
- Stocks – The winning bet for the long term
4. Open a Public Provident Fund (PPF) account
You are just starting your career, and retirement is the last thing on your mind. But it doesn’t hurt to plan a little in advance, right?
So, apart from starting the SIPs for your long term goals, also start building a solid core for your retirement corpus by opening a PPF account and investing in it regularly.
PPF is risk-free (it is backed by the Government of India), it is absolutely tax free, and moreover, it also provides you income tax benefits under Section 80C!
Also read:
- Public Provident Fund (PPF) – Plan Your Retirement and Save Tax
- Saving Income Tax – Understanding Section 80C Deductions
5. Save for the down payment of your house
Sooner or later, you would want to purchase your own house / apartment (Hint: The sooner the better!).
Of course, you would take a home loan for it. But a home loan is available only for 80-85% of the cost. You need to pay the remaining 15-20% as the down payment. And this can – and would – be a large sum!
Why not start saving for it soon? Put some money aside specifically for this every month.
Invest it depending on when you want to buy the house. Put the money in bank FDs / debt funds if you would want to buy the house soon, or put it in an equity MF through SIPs if the purchase is a few years away.
Also read:
- “Settle” early in life – buy a home when young
- An introduction to home loans and factors to consider
- Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage
- Fixed Deposit (FD) – A favourite for generations
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