What to do with your first salary: 5 amazing tips to make you money-wise and set you up for life

Getting your first salary is always a heady feeling. The first instinct, of course, is to splurge and spend on things you have wanted to—with your own hard-earned money. Once the euphoria wears off, you have to start thinking ahead and saving up for the future. The sooner you begin saving and investing your money, greater the returns since with increasing age comes greater responsibilities. Becoming financially secure should be among your top priorities.
Starting earlyThink about your future goals and set aside some money each month from your salary right from the beginning. The longer your money stays invested, the higher your returns due to the power of compounding. Once you begin earning, you should know how much money you are spending each month, and where. It is important to create a monthly budget so you don’t overspend.
Good credit scoreDuring the early years, the feeling of earning your own money and spending as you like can be heady, and there can be a tendency to revolve your credit card dues or delay payments without thinking of the consequences. These can affect your credit score and hamper your ability to take a loan (such as home loan) when you really want to. Learn to live within your means and avoid maxing out your credit cards. Try and avoid revolving credit or using the cash withdrawal/EMI option on your cards wherever possible.
File your income tax returnDepending on your salary slab as you begin earning, you may or may not be liable to pay income tax. Spend time with your company accountant / CA and understand how salary calculations are done, and how you can save tax. Remember, tax deduction by your employer is not enough. You still have to file your income tax return, usually by July 31 each year. Do not wait till the last day to do so. Give yourself enough time and file your return in advance.
Get insuranceOver the years, medical costs have been on the rise, and a health insurance cover is a must-have now. The earlier you get it, the better. When you are younger with no pre-existing diseases, you pay a lower premium. If you have financial dependents, you can also consider getting a life insurance policy. Both life insurance and health insurance (self, dependents, parents) premiums are also eligible for a tax deduction.
Diversify your investmentsWhen you begin earning, your parents are likely to suggest putting some money in a bank fixed deposit—the tried and trusted investment option for most Indians. However, the interest is taxable and along with the inflation factor, the returns aren’t so great. You can consider other investment avenues as well, like real estate, gold (physical or ETF), PPF, NPS. Equities are one option that can give a boost to your investment portfolio. If you’re not comfortable investing in stocks, you can look at equity mutual funds. There are tax saving funds as well, and you can invest via a Systematic Investment Plan (SIP), which helps you plan and save for upcoming spends. Nobody can predict the future, but you can try and be prepared for it. Whether it is loss of your job or a family/medical emergency, having an emergency fund can help you avoid a financial crisis. Set money aside from your salary each money for this fund. The amount depends on your lifestyle and should take care of 6-8 months of living expenses and commitments. It should also be easily and quickly accessible when needed.

Make your children money wise – Saving Tips

Let them choose their own savings goals. It may sound like a good idea to have all of your child's savings go toward education, but little children can learn a lot from setting short-term goals that are fun and meaningful to them. The payoff shouldn’t be too far in the future and unattainable. When they are able to set goals, they grow up being able to save longer and better.

Consider savings and spending guidelines. Some families have children set aside a certain percentage of their money for savings. If you do so, make sure to give the children money in small bills—and ask their grandparents to do the same when giving cash gifts.

http://www.truthaboutmoney.co.za/

3 Money-Wise Tips for Military Renters

the costs and stresses of renting your home with these steps.

If you’re on active duty, you probably move a lot. Often, living on base or renting a nearby apartment makes the most sense financially. But renting can drain your bank account if you’re caught off guard. Before you sign a lease, follow these three tips to help protect your hard-earned money.

1. Heed your housing allowance.

If you’re not living in military quarters, you’re generally eligible for some form of Basic Allowance for Housing— a tax-free, monthly allowance to help you pay for housing expenses. The size of your monthly check depends on your duty station and pay grade and whether you have dependents.

It’s important to understand that your housing allowance is calculated the same no matter what you pay for rent. If your rent is higher than your allowance, you’ll have to make up the difference. If it’s less, you’ll enjoy a monthly surplus.

But don’t make the mistake of matching your rent exactly to your allowance amount, because you won’t have enough left over to cover items such as insurance and utilities. Research the cost of utilities, renters insurance and other add-ons, then cap your rent (usually somewhere between 65 and 85% of your allowance) to leave enough to cover those additional expenses.

2. Insist on a military-friendly lease.

When you’re on active duty, numerous scenarios could force you to move before your lease has expired:

• Deployment
• Orders to move onto the installation
• Permanent change of station
• Retirement or separation from service

Make sure a sudden move won’t cause you big headaches. While the Servicemembers Civil Relief Act (SCRA) provides certain protections, a so-called “military clause” that lets you terminate the agreement without penalty can offer additional security in any of these situations. Your installation’s military assistance officer can help you draft language that gives you the protection you need.

3. Protect your stuff.

Once you secure your housing, make renters insurance a priority. This is important whether you’re living inside or outside the gates of a military installation.

If a fire, flood or thief sweep through your dwelling, you may be on the hook for the cost of replacing part or all of your personal possessions — clothes, electronics, jewelry and anything else you owned. Coverage available through the government may be minimal, so a renters insurance policy could save you thousands of dollars if you suffer such a loss.

A suitable renters insurance policy can cost as little as $12 a month — well worth it to help protect you from a potential financial catastrophe.

5 Smart Ways to Spend Your Tax Refund

Tax refunds present an opportunity to better your financial health. Unfortunately, many refund recipients don’t take advantage of it. “A tax refund often feels like ‘free’ money, and many people use the funds to splurge on expensive items they wouldn’t otherwise purchase,” says Mike Sullivan, chief education officer for Take Charge America, a national non-profit credit counseling agency. “However, a refund presents a unique opportunity to use the money to improve your family’s financial wellbeing now and in the long term.” If you receive a refund this year, consider using it in one (or all!) of the following ways:

1. Pay Off Debt – When you receive your refund, resist the urge to spend it on a shopping spree, fancy dinner or pricey vacation. Instead, use your refund to pay down credit card balances, student loans, auto loans or other debt.
2. Pay Down Your Mortgage – Direct your refund toward your mortgage principal. Even one extra payment each year can shave noticeable interest off your mortgage.
3. Boost Your Savings – If you’re debt-free, put your money toward your emergency savings fund, retirement plan or college savings account.
4. Adjust Your Withholding – File a new W4 to increase your allowances and pay the appropriate amount of taxes throughout the year. Use the IRS withholding calculator and aim for the number of allowances that satisfies 100 to 110 percent of last year’s tax payment.
5. Use Direct Deposit – Set up an automatic deposit to direct the money you would have spent on excess taxes into an interest-bearing savings account. You won’t notice the difference in your paycheck— it’s money that would have been withheld for taxes—but your contributions will quickly add up.

It pays to be moneywise: Tips for being smart about finances

Learning about the basics of financial management now can help ensure that you won't have financial problems later on in life. Here are some basic tips to get you started, including three common money management mistakes, credit card rules and how to understand the term "Annual Percentage Rate," or APR.

COMMON MONEY MANAGEMENT MISTAKES

1. Getting a big tax refund each year. This is a sign that you may be having too much tax withheld from your paychecks. If this is the only way you’re able to save, it’s certainly better than nothing (assuming that you actually save that money or use it to pay down debt, of course). The problem is that it’s not exactly the most efficient way to save. Not only are you losing the ability to earn anything on that interest-free loan to Uncle Sam, but you also lose access to that money in the event of an emergency.

2. Paying a little extra on all your credit card debt. That’s certainly better than not making any extra payments or not even paying your bill in full. However, you can pay your debt off faster by putting all the extra money towards the debt with the highest interest rate and making just the minimum payments on the rest. As one balance is paid off, you’d then put those payments towards the remaining card with the highest rate until you’re debt free.

3. Saving whatever is left at the end of the month. If you do that, don’t be surprised when there isn’t anything left to save. Instead, have your savings automatically set aside before you even have a chance to spend it. You can also have money automatically transferred from your checking account to savings accounts and an IRA.

CREDIT CARD RULES

• Remember that credit cards are not “free money.” They’re more like a loan that you must pay back.

• If you pay your full bill each month, you won’t have to pay interest. If you pay the minimum amount or only part of your bill, you’ll pay interest on your balance.  

• Credit cards aren’t “good” or “bad.” Spending habits, responsibility, ability to make payments, and other factors determine whether a credit card makes sense.

• Know yourself and your spending habits before getting a credit card.

LIFE, DEFINED: ANNUAL PERCENTAGE RATE

The annual rate that is charged for borrowing, expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This is a key factor in any credit card or loan decision.

Money-wise tips for Entrepreneurs

Whether you wish to turn your idea into a start-up or already have an established small business, optimum use of funds is the key to success. Even small things like planning for off-seasons, renting instead of buying and using freely available technology can go a long way in building your business. Below are 11 financial tips that would help small business owners manage their finances better.

Invest in technology

Gone are the times when only brick-and-mortar office was sufficient to clock decent sales. In today's world, online presence is a necessity. Many businesses have lost the race by not going online with the changing business landscape. On the contrary, many small businesses have reached great heights by selling their products globally. Bricks and clicks is the new

 definition of a business location. Also, many freely available applications can simplify accounting and help track various aspects of business.

Contingency fund

Basic motive of a contingency fund is to provide financial security in times of desperate need such as medical emergencies. Ideally one should have six months' living expenses as contingency fund. Start building such a fund and invest it in debt mutual fund so as to get higher returns than savings account and yet enjoy liquidity.

Avoid costly credit

While financing your business, cost of credit is a critical factor. Especially in the initial months of operation, when the business has not yet reached break-even point. The financing of the business should be done keeping the interest cost at bare minimum. This would help in reducing cost and attaining profitability earlier.

Keep separate bank accounts

The business and personal bank accounts should be kept separate. This would provide a twin benefit of easier accounting at the end of the financial year for tax ascertainment purposes and would also eliminate the situations of cash crunch in business caused due to withdrawals for personal expenditure.

Bad debts

Bad debts refer to debt that cannot be recovered. Bad debts are created when credit sales become worthless. The business owners should not carry these bad debts into their financials year after year. Instead these should be written off in the next year so that a healthy financial position of business can be portrayed to potential stakeholders.

Review your insurance

Insurance provides much needed financial security for your dependents, who could be your ageing parents or your children. With time one should increase their insurance cover so as to cover all their dependents. Also buying insurance early in life would be cheaper as compared to buying it later in life. Ideally, the insurance cover should be 10 times your annual income.

Plan for Big Expenses

Small business owners should spend wisely as a cash crunch could adversely affect business functioning. Planning a year in advance for large expenses can help reduce the financial burden and ensure your cash flow position stays strong even in the tightest months.

Invest a portion of income for retirement

You would not want to consume your time during retirement thinking of ways to keep the money coming. The best way is to plan early. Start by investing some part of your income to fund your retirement. We often miss factoring in inflation while thinking of retirement. Consider inflation and you would realise how expensive retirement would be.

Plan for off-season with a reserve fund

Businesses do not give consistent sales month on month. Most businesses are seasonal in nature. Therefore, it is important to create a steady flow of income. To accomplish this, a proportion of income in months of high sales should be diverted towards a reserve account that would help to pay for expenses in the off-months.

Build and track your credit score

Businessmen should be wary of their credit score as this is a critical factor for securing credit. A credit score of 750 and above is ideal. Personal credit score of owner matters while availing a loan for business.

Renting instead of buying

Renting equipment instead of buying would help to keep the cost low. This saving in cost can be utilised in other areas to make the business more productive.

Want to make the world a better place? You may want to rethink your relationship with money.

Did you, like me, grow up thinking that money doesn’t make you happy and that there are much more important things in life? Were you raised with the idea that money is dirty, and something to avoid? That striving for it might make you a bad person? The result of such an upbringing – and way of thinking – may be that you are a nice and caring person, with less money than you could have had. And, that’s a pity, because you could have used that money to do good.

Money: holy grail, or 
I’ve come to realize that it’s not just greedy people that may have a problematic relationship with money, but also people who I will call “do-gooders” (with all due respect, and for want of a better word).
While the greedy people may live with the idea that money is the most wonderful thing in the world and want as much of it as they can get, the do-gooders will often avoid it as much as they can, believing it is a bad thing. They will see being rich as a vice and being relatively poor as a virtue (I know, this dichotomy of greedy bastards versus do-gooders is a bit too simplistic, but let’s keep it for the sake of the argument).

You might be missing out
At this point you may already be pulling up your nose, slightly disgusted at the fact that on this “non-profit” blog, I’m writing about making – or at least not shunning – money. This almost sounds like the text of a would-be financial guru who is telling you it’s your right to get rich, right? But, you having that feeling would exactly prove my point.

Let me try to put you a bit at ease. First of all, I’m not talking about getting super wealthy here (more about what I mean later). Neither am I talking about making more money for your own sake (though I wouldn’t condemn that). Rather, I suggest that we learn to appreciate the value of money for the good things we can do with it. And no, I don’t believe donations or philanthro-capitalism will solve all the problems in the world, and I do think we need more systemic solutions. I believe there are quite a few problems with how a lot of money is made, the role it has in our society and the way people go after it. And, I believe that unbridled capitalism suffers from a lot of shortcomings.
But, I also believe that more money in the hands of good, caring people is a good thing, and that the do-goodies shouldn’t leave the making of money to the greedy ones.

My career without much money
Because telling people in social movements that they might want to care more about money will, in the eyes of some, unavoidably make me look un-virtuous, let me add that my own twenty-year career as an animal rights advocate has been largely unpaid or for very small financial returns. I had the ability to do that, because my girlfriend owns the house we live in (thanks to her grandparents); so, we don’t have to pay rent, and we rent out part of it through AirBnb, which provides a bit of extra income. The fact, however, that I can do my activism unpaid doesn’t mean that I am against people making money from activism. If one can earn one’s keep doing something good, and, thus, have more time to do it, what would be the problem with that?

20.000 euros down the drain?Back to where we were. This is what I realized: because I never learned to take an interest in money, I missed out on opportunities to make a difference. My parents are quite ethical people who care about making the world a better place. But, in not teaching me to sufficiently value money and in giving me the impression I should shun it, they may have inadvertently reduced my chances of doing good.

Let me illustrate this more concretely. I remember at one point – about twenty years ago – having about ten thousand euros in my bank account (back then it was in a different currency, but never mind that). Suppose I had had no need to touch that amount since then, and that it had just been sitting in my savings account. The average interest on a savings account in the past twenty years in Belgium has been about two percent. At that rate, after twenty years, that capital would have grown to about 14.500 €. If I had invested the initial 10.000 € in something (stocks or bonds, for instance) that would have offered me a higher interest rate (say a reasonable and realistic seven percent), my capital would have increased to about 36.000 €. That is a difference of more than 20.000 €. And, that’s just on this small initial sum. Note that present day interest is usually less than one percent, while inflation rates are at two percent; so, your money is quickly losing its value in a regular savings account.

Einstein called compound interest the eighth wonder of the world.

The problem was that I had no financial knowledge at all, and wasn’t motivated or stimulated to learn about it. Einstein famously called compound interest the eighth miracle of the world (check this page to learn a bit more), but I only really realized how it works this year, at age 44. It’s also only now that I realize a lot of the things we think about investing are incorrect clichés, and that when done properly and wisely, investing is not as risky as most people think it is. In fact, one line I read again and again is that we can’t afford not to invest. Maybe I’m particularly late and slow, but there must be many more people – do-gooders especially – like me (my guess is the “money = evil” attitude is more prevalent in Europe than in the US and other parts of the world).

All the good you can do
If today, you are still convinced that money is dirty and evil and you don’t want any of it, your reaction might be: 1. so what? and 2. investing like that is unethical anyway. I’ll respond briefly to these arguments, but I am under no illusion that I will convince the most anti-capitalist among readers. So be it.
Regarding “so what?”: if you think rationally about this for a minute, you know that there is no doubt that money can be used to do good. You could do good with this money in several ways:
– You could donate it to a non-profit.
– You could invest it in a sustainable or compassionate startup.
– You could even live on it yourself for a year or a couple of years (depending where you live), so that you don’t have to have some run of the mill paid job and have more time to volunteer.
– You could start your own project with it.

I think it’s clear that you are better off having this money than not having it. Unless of course, having made that money by investing would somehow be necessarily unethical (which is the second objection). There obviously are many unethical ways to make money. You can uncritically invest in stocks or funds where your money is used for bad things. But, that is not necessarily so, and many banks today offer sustainable investment options. These may not be entirely satisfactory to all of us, but it is possible to find ways to invest that are healthy and sound, or at least neutral. Moreover, apart from increasing your own returns, you also help these companies grow by helping them to raise capital. And, if you want, as a shareholder you can even participate and vote at their annual general meeting and help determine the course of the company.
Some would argue that by participating in the stock market, one is contributing to a system that is fundamentally flawed and problematic. But, then, so is putting your money in a savings account – because that too is a way of investing in and contributing to systems you may fault – and with even less control, at that!
Probably many of us have simplistic ideas about capitalism. This talkby Jonathan Haidt does a good job at illustrating that.

Let’s look at some other objections to making money – all of which I held at some point, or still partly hold.

“Money corrupts. People who are interested in money don’t end up caring about the world.”
I don’t think there is any law of nature that dictates that money corrupts. It may also be that people who are greedy to begin with are the ones to acquire a lot of money, rather than the other way around. In any case, in this post, I’m not at all talking about the ruthless accumulation of wealth through all means possible. I’m simply talking about taking *some* interest in money and investing it in an ethical way, so that we have more means at our disposal to do good.
Also, don’t forget about people who got really rich and because of that are returning a lot of their wealth to society and are investing it, for instance, in the animal rights movement or any other movement. Our movement is actually to a large extent funded by people who made a lot of money (hopefully in the nicest ways possible) and are donating it to a cause they care about.

“Money is irrelevant.”
Some people – often those who are interested in spirituality – would hold that money is not what makes the world go round and that it is actually irrelevant. It’s not about what you have, but what you are, etc. I’d say: try to tell that to poor people. Probably only those who are privileged enough can say things like this (even though there might be some grains of truth in these opinions here and there).

“Money and the role it plays in our society is inherently problematic.”
As long as we’re not enlightened and don’t have the means to freely provide each other with whatever we need, money is a convenient way to exchange goods and services. At the same time, I think it’s a pretty primitive one, and I can imagine societies and worlds in which we’re no longer using it. Too many things are determined by how much money we have, and shouldn’t be. Here’s a simple example: for a person with little money, it is much more difficult to ride a train in first class. Yet, she may have a higher need for it: she may need to focus, have concentration problems, suffer from panic attacks and have more need for quiet, or whatever. The fact that her level of wealth determines how she can travel does not seem optimal at all.

If we want new systems, we’ll need money for that, too. Even if you loathe capitalism and want to throw it over, you’ll probably do it faster if you have money to help create a movement. There is an attempt in my country to create a new kind of bank (a bank of the people). To start it, they need… money. I think a good way to see it is that any new systems we are going to build will partly or largely be built with money from the old systems…

My preliminary conclusions
If I would have children (I don’t and won’t), I would try to teach them that money is not an end in itself, but that as a means to great ends, it can be extremely helpful. I would make sure they don’t grow up thinking that money, and making it, is bad or evil or corrupting. I would try to raise them with a desire to become people with integrity, who also value money for the good they can do with it. I would teach them some financial literacy, and warn them to not under- or over-estimate the risks involved in investing.

Many do-gooders too might want to slightly rethink their relationship with money. It would be good if movements of do-gooders told their members and activists something about the importance of money. If young people start to invest wisely and sustainably at the age of say 22, after graduation, they can build up capital that can make an incredible difference in the world. I haven’t looked at any numbers, and don’t know if any are available, but my suspicion is that many activists, across movements, are people who are not exactly well off. What if we were better off, and had more means to spend on our movement and our own happiness? What if we didn’t leave the making of money to the greedy people only. Money, though often abused, or considered an end, is nothing more than a tool. It’s a tool just like marketing is a tool. We can choose to abstain from using these tools, and leave the using of them in the hands of people who will often be likely to abuse them, or we can wield them ourselves and do some good with it.