Celebrate Your First Pay Check
Don't kill it
My student Bhanu called up excitedly. “Mam, I wish to invite you to dinner tonight”. “What is the matter?” I asked him, wondering about his rather exuberant tone.
“Mam, please take out time, we need to celebrate, with a glass of Sangria, I have received my first paycheck, and since you have been my mentor, my celebration with you has to be first before I take my friends and family out for an evening”.
This was an honor, that I could not refuse.
In the evening, sharp at 8 PM he was at my door, having come in a cab. He looked really very smart. He was wearing a new shirt, trousers, shoes and that was not all, he had bought a gold bracelet too.
The dinner was really good. I complimented him on the choice of restaurant and having turned up on time smartly dressed and looking really nice after he had finished his MBA and had gone to work.
After exchanging pleasantries, becoming a finance professor again, I asked him if he had saved something and how he had invested it. He replied, mam “This was only my first check and I have also bought the gold bracelet which I am wearing and you appreciated it so much”.
He had splurged and finished all the money and was now paying out of his credit card.
I was shocked!
He had learnt nothing from his finance professor that’s me though he appreciated me and honoured me so much. So I gave him a lecture.
Celebrate your first paycheck but do not kill it.
So after a lot of cajoling and threatening, he had no choice but to listen to me.
The first question that I asked him was What is your salary? He was confused!
He told me his CTC.
What is CTC? It is the cost to the company, I told him. Then he realized that the salary promised is not the take-home salary. It consists of a bonus, conveyance, some kind of advantages the company gives you from which you benefit and it is different from the salary he received.
I told him that the company will also cut tax from his earnings which they will deposit directly to the tax department. According to the rules, every country has a slab based on the yearly salary and tax has to be deducted at the time of paying a cheque.
#My first lesson
Do Not Spend All: Find out the exact amount you will receive every month and do NOT spend the full amount or you will kill your happiness and not enjoy for you will be in debt.
#Lesson 2
Plan Your Monthly Expenses: Find out your basic expenses on rent, food, maintenance and house help.
Then keep aside some amount for partying and going out with friends. Socializing is a very important requirement to keep your mind happy and healthy.
However 20% of the monthly earning he had to put in the bank for future emergencies, which he should take out only during dire necessities.
This amount will also go towards savings of a fund which he will invest after 6 months of sticking to his job.
#Lesson 3
No Debt Formula: When you spend, do not go into debt. Use your card judiciously, out of the money that you have received as salary. Do not overspend. Also, do not take credit.
The moment you get into the habit of using your credit card beyond your pocket, it becomes easy to overspend. Amazon world over and many other e-tailers are constantly luring you to buy more. You get lured to buy new things.
One debt after another and then you are unable to pay back the money. Either the bank takes back your credit card and blacklists you or you end up borrowing money from your friends and relatives.
#Lesson 4
Make a Financial Plan: Make hay while the sun shines. When you have a job, plan and begin to save into a systematic investment plan. In this manner, you will compulsorily save every month.
A drop every month will certainly increase and the kitty will enlargen and your money will begin to grow.By the end of the year, you will have a smile on your face and happy that you have some money saved and which is gradually increasing.
#Lesson 5
Keep Your Investments Diversified. It is never a good idea to save only one plan. Some people are good at the stock market and they prefer to buy shares. Again I do caution them that it is better to be a long term investment rather than get into speculation or day trading.
Some youngsters prefer only equity shares. This is not a good idea. A mix and match formula is much better. So while you put some money in your Saving investment plan, some of it can be in equity stock.
Some of the amounts should be kept in the bank for medical and other emergencies.
So finally what are the key takeaways?
- Celebrate, enjoy and live your life to the fullest.
- Please do not suppress all your desires.
- Have a balanced life. The balance between spending and saving will make a harmonious life.
- Never kill your happiness with debt and with the burden of paying back excessive money overdrawn for basic requirements.
- Save a little every month and you will have a pool of savings.
- Do not miss out on the sunny days. Enjoy them and make savings a habit.
- Diversify your investments. One avenue will not give desired results. Plan and invest.
Conclusion
Professors will continue to lecture but all for a good cause. The first step will either make or mar your whole monetary life. It is very important to spend but splurging is not recommended all the time. Learn to shake your head and say no to unnecessary purchases. Plan your finances, celebrate and have bountiful success in your life.