Financial advise for new earners

Most of my posts relate to my personal life, some more than others. This post however, is very specific and is directed towards my daughter who is in her BE final year in BITS Hyderabad now and will be starting her career next year. Of course, this can be equally for any person of her age or even in the first 2-3 years of their career.

To begin with I am very happy to see that there are excellent opportunities in the country today for bright people from good institutions. This goes, not only for Engineering education but for many other streams too. Any opportunity is however, only a launch pad and what is critical is how people use the opportunity to build their career and lives. Financial prudence in the right investments and handling money will be important but one must first maximize investment in one’s own ability first.

Let me make it simple – your ability to do well in your career and consequently earn money will really depend on what value you bring to the table that is useful to others. As long as you add value you will be relevant in the corporate or any other world and money will follow. The day you lose your value you will stagnate in your career or fall by the wayside. Therefore, invest in yourself by learning new things and applying them well. This can be a second degree like an MBA, a specific training in new and emerging area such as Business Analytic or a new business idea that you want to develop on your own.

That being said, how should you deal with money, now that you will be getting some of your own at long last? You must spend on what matters to you. Savings and investments will be there all your life and I am not asking any of you to be reckless in your spending, but go ahead and buy stuff for yourself and others that you have always wanted to but possibly did not have the money or the brazenness to ask your parents. After 20 or 22 years of education, very often in rather competitive circumstances to get where you have got to, you deserve this much. Once this initial charm of spending money on yourself and buying gifts for others get done, you can settle down to charting out your financial road map.

I will simply put some pointers here and let you work out the rest. You can go through the rest of this blog and all other resources available publicly to work out a plan of your own:-

  • Take a health and accident insurance, there are really no guarantees in life.
  • If you have dependents who need your income, take a term insurance. If you do not then there is no need to do so.
  • Do not worry yourself about goals etc for the long term now and definitely ignore anyone completely who wants you to invest for retirement. If you are looking at short term goals such as higher education, buying a car, down payment for an apartment etc, you will need to invest for it.
  • This will sound unexciting but you must open a PPF account and try to contribute the maximum to it every year. Debt instruments demonstrate the true power of compounding and PPF is the best long term instrument in many ways.
  • You must consider investment in Mutual Funds as these are great instruments run by professionals who are fairly good at what they do. At the same time, do not blindly go for an automated SIP that simply invests the same amount every month, irrespective of the state of the market. You are intelligent and will figure out a way to invest wisely.
  • Start building a stock portfolio for yourself as soon as you can. You can start small, gain knowledge and experience needed for building a good portfolio and do it over the long term. In a growth market like India, businesses will generate wealth and having a good diversified stock portfolio is your gateway to participating in this wealth.
  • Do not buy products you do not understand, never invest in a company whose business you are not clear about.
  • Contribute generously to good causes, there are many who are far less fortunate than you in having opportunities in life. Small contributions from each one of us can make a great deal of difference to their lives.
  • Finally do not get obsessed by finance or investment, unless you are doing that as a living !! Enjoy your profession and your life along with some sensible choices in investments and you will be fine.

I hope that was not too heavy, do not worry all of you will be fine as you go along. We had all started out in the same fashion ( with lot less opportunities ) and have not done too badly for ourselves.

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3 thoughts on “Financial advise for new earners

  1. Contribute generously to good causes, there are many who are far less fortunate than you in having opportunities in life. Small contributions from each one of us can make a great deal of difference to their lives.

    Very important point, thanks

    Like

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