5 Financial Mistakes Most People Make When Starting Their First Job

By BankBazaar | June 5, 2017

5 Financial Mistakes Most People Make When Starting Their First Job

If you’re in your 20s and just finished college, you probably have a bag full of dreams and ambitions. Since we are all different people, our aims and aspirations are likely to vary. One thing, however, remains the same for most of us. All of us want to become rich. Maybe not rich in a millionaire kind of way, but at least financially independent and economically sound. You certainly wouldn’t want to end up on the streets or go broke.

If you’re concerned that you may not be adept at managing your money, don’t be. There are a couple of steps you can take to get you out of unwanted financial situations and ensure that your worst financial nightmare doesn’t come true.

If you’ve just started earning, chances are that you’re confused about how to handle your finances. We get it. It can be quite a task. It’s really easy to get excited about salary getting deposited in your account and use (and misuse) it. Yes, we know you earned it and you have all the right to use it the way you want to. But, there are better ways of doing that. All we want is for you to have enough saved for a rainy day.

Additional Reading: Savings for Young Adults At Their First Job

Starting your first job is probably one of the biggest achievements of your life. The best thing about it? You finally get to experience the power of financial independence. It’s a great feeling. Isn’t it? However, there’s a catch to it. Financial freedom comes with a responsibilities as well. This sense of financial freedom can potentially ruin things for you if you’re careless about your finances. Precisely why you need to abide by certain rules and avoid making the following financial mistakes (especially at the start of your career).

This sense of financial freedom can potentially ruin things for you if you’re careless about your finances. This is precisely why you need to abide by certain rules and avoid making the following financial mistakes (especially at the start of your career).

Salary Credited. Bring Out That Wish List.

When your phone beeps and you see a message that reads ‘Salary credited’, it probably feels like the most amazing thing in the world. The next reflex action? You start to look for that wish list and hit the latest shopping websites to fulfil those wishes.

However, when you get your paycheque, don’t immediately rush to the ‘Hot Deals’ page of your favourite online shopping website. Big purchases are a big no-no. If it’s something you desperately need, like if your fridge broke down (food is the most important thing in life, after all), then buying a new one makes complete sense. You also have to think of other crucial things like paying off those utility bills.

If you plan on buying something huge—like a house or a car maybe; you definitely need to think twice before spending your salary. ‘Will I be able to manage the EMIs?’ ‘Is it too much financial pressure?’ These questions must cross your mind. Don’t move forward unless you have these answered.

The Swipe Game

This game is highly dangerous and can potentially damage your financial life as well as the chances of you having a secure future. We know what you’re thinking. Why would you go after more credit options when you have a new job that can take care of all your expenses?

Actually, the truth is a bit different. As people start to earn (or earn more than before), they start looking for more and more credit. That’s when they try to take advantage of all possible Credit Card offers they come across.

Getting a plastic buddy is great, as long as you use it responsibly. Since you’ve started working, it’s a good time for you to start building your Credit Score as well. But, you need to think twice before opting for any new cards. Explore all available offers and then choose one that best suits your needs.

Use your Credit Cards correctly and don’t forget to pay your bills on time. Instead of making late payments or minimum payments, try being a little more disciplined.

Additional Reading: Top Ten Credit Cards In India

Retirement/Emergency Fund

Don’t ignore saving up for an emergency fund. If you’re aiming for complete financial independence, you need to play safe. You need to ensure that in you have enough saved to help you sail through any rough phases that may come your way. Your monthly paycheck alone is not going to help. All you need to do is reduce splurging on unnecessary things and focus on saving more.

The funny thing about emergencies is that they come and go unannounced. Basically, you need to take matters into your own hands and build a financial cushion around yourself.

Another crucial thing you need to prepare yourself for is retirement. While you do have enough time to prepare yourself for retirement, you still need to manage your money better and make use of some saving/investment tools to ensure you have a sizeable kitty saved up when you hang up your boots.

Since you’ve just started working and earning, it might be slightly difficult to get things in order. That’s when opening a Recurring Deposit will help you. It’s a small step towards something big. Once you get into the habit of keeping all the additional money aside, you can look at other investment options that require a bigger level of commitment. No matter what you do, just save enough to be prepared for unexpected expenses.

Check This: Best Recurring Deposit Rates

You Need To Do The Math

Since you’ve started earning, you need to take a pen and a piece of paper and do some calculations. Don’t worry! It’s nothing to be scared of. As long as you have a basic idea about tax calculations, you’re all set. All you need to do is talk to someone who’s an expert at it.

With or without their help, you basically just need to know what your taxable income is and plan accordingly. Look for investment options and other instruments that can help you save on tax. It’s better to start doing this early (right from your first job), so that as time passes, you get better at tax planning. It’ll prove to be extremely beneficial in the long run.

Where’s Your Personal Budget?

We hope the answer isn’t on the lines of ‘nah, I don’t need it’. If you think you don’t need to make and follow a personal budget, you are absolutely wrong. Doesn’t matter if it’s your first or second job, you just need to know the art of budgeting and money management. Something even as small as planning those trips to buy groceries needs to be planned well. These are the small things that we often neglect. Smart budgeting can go a long way towards positively affecting your bank account balance.

Bonus Read: 4 Possible Leaks In Your Budget

Since you no longer need to remain dependent on your parents for pocket money, planning and budgeting are all up to you. Since the dynamics of your money inflow and outflow has changed now, you need to make some changes in the way you spend as well. You need to know what your priorities are and spend accordingly. Once you learn to do that, half of your worries will be over.

So, what’s the first thing you should do now? Sit down and make a budget. You can’t go on buying random things or spending unnecessarily. You need a fool-proof plan. No matter how excited you are about this new phase of your life, you can easily lose it all due to lack of proper planning. Don’t let that happen.

So, keep away from these five financial mistakes and you’ll never go wrong with your money matters.

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