The Buyt Desk
The joy when your first salary is credited is immeasurable. For the first time you get your own bank account, your own ATM card and the cheque book has your name printed on it. These are the unforgettable moments of life. But right after this comes the tough question – What should you do with your first salary? Spend it on things that you have wanted or accumulate it in your savings bank account? The answer is yes and no. Yes, you should and must spend a portion of your salary on things that you have craved for a long. No for accumulating your money in a bank account. But you must save a part of your money and instead of parking it in your bank account put this money to work so that it can help you in acquiring better and bigger goals in your life.
Start Your Investment Journey
The earlier you start the better you are. Investing your hard-earned money should become a habit for you. Break the chain of earn-spend- earn- spend to earn- invest-spend. Invest before you spend mantra can make you a wise investor. Making a monthly budget will be a step in the right direction. Divide your salary into parts and dedicate a portion of around 30% towards investment. If 30% looks like a bigger amount then start with 20% of your every month which you could gradually increase.
What should be your first investment with your first salary?
There are a few traditional ways of investments and some which have cropped up recently. I will take you through the various options that you have. Take your pick-
Recurring Deposit(RD)
This is one of the oldest ways of investing. If you are new to investing and want to take baby steps then RD could be a good way to start. In a recurring deposit, you make a monthly deposit for a fixed term. The time period could be 1, 3 or 5 years. Just like a bank fixed deposit, you will earn interest on RD but the difference is that in an FD you need to deposit a lumpsum amount whereas RD gives you the flexibility to deposit in monthly instalments. You can open an RD account with a bank or post office. The interest rate offered by banks on RD is between 4 to 6.5%.
Public Provident Fund(PPF)
Public Provident Fund(PPF) is one of the oldest and most popular small savings schemes. It has a lock-in of 15 years. PPF gives you the benefit of compounding interest. At present, the interest on PPF is fixed at 7.10% for the Oct-Dec2021 quarter. You can open a PPF in a bank or a post office. The maximum that you can deposit in one year is 1.5 lakhs and you can claim this as tax deduction under Section 80C of the Income Tax Act. PPF gives you the flexibility of depositing money the way you want to. You could choose to deposit a lump sum at one go or deposit in monthly mode.
Mutual Fund Investment – SIP
If you want a modern way of investment then definitely equity mutual funds can be one way of investing. Mutual Funds are a new tool and you don’t earn a return through interest but the share market performance decides your return. You can start your investment with as low as Rs 500 through a Systematic Investment Plan. You pick a fund from a number of schemes offered by a mutual fund house. You get to participate in the equity market but not directly through the stock market. For a new person, the stock market could be a bit intimidating. Without doing any prior research if you plan to enter the stock market it could backfire. Whereas a mutual fund is an indirect way of participation where an expert fund manager makes the fund and monitors its performance. The mutual fund company does charge you a fee for the expertise that they provide in the form of expense ratio.
Here are three ways you can start your investment journey. Always remember the right time to invest is always ‘NOW’. Don’t keep waiting for the right time and right way but begin as early as possible.
