Use Your First Salary Wisely – Buy a Life Insure

Written by : Knowledge Centre Team

2020-08-10

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Looking at the message that your salary is credited to your account is one of the world’s greatest happiness. Receiving your first salary is special, as you see all those years of education and going through countless interviews finally pay off. It is a sign of your newfound financial freedom. By now you have probably started planning about the gifts you’ll buy, the places you’ll go and fulfill all your desires.

Hold on, take a deep breath and instead of impulsively spending your hard earned money on partying and buying gifts, start thinking about making this new beginning worthwhile. But where do you start? You can invest your first salary in numerous ways that can ensure a safe and secure future, from mutual funds to savings account and a life insurance policy. Read on to find out what can be done.

Start By Planning Your Budget And Setting Financial Goals:

Budgeting your expenses is the most important thing to do after you get your fist salary. Set limits on the amount you spend and decide a scope for savings. Once you have a budget in place, set long and short term goals to divide your savings for maximum returns. Financial planning helps you secure your future and save for your life goals, be it creating a retirement corpus, saving for that big trip you’ve been wanted to take, or buying a car for your family.

Where To Invest Your First Salary?

An essential component of a sound financial plan is a life insurance. Investing your first salary on buying insurance can prove to be a beneficial for the security of your loved ones in the long run. You can opt for a term insurance plan, which provides a large cover at an affordable premium.

You must remember that buying insurance early offers several benefits, including low premiums and an accelerated application process. Also, when purchased young, you are generally in good health, ensuring you get quick approval. Even if you haven’t set definite goals, investing some portion of your salary can ensure you are prepared for the uncertainties of life.

1) Buy life and illness insurance

Before you start investing for your future, you need to protect yourself and your loved ones from the uncertainties of the future. Invest in a long-term life insurance policy, typically, a life insurance policy that comes with built-in covers that covers you against critical illnesses and accidents. Little investments like these made in time can prove beneficial and save a lot of money in the future. Also, keep a provision for medical emergencies and the costs that come along. Choose a medical insurance plan that will cover you in case of an unexpected emergency.

Along with cover against death and terminal illness, the iSelect Smart360 Term Plan offers a unique limited premium payment option, where you pay premiums for a limited time period but get an extended cover for longer. It is ideal for youngsters who are working and can pay regular premiums from their salaries now, but can remain covered for an extended period when they can no longer pay the premiums.

2) Start investing in saving instruments

Start a mutual fund investment as they can get you competitive returns on your investment. Alternatively, you can also opt for a Unit-Linked Investment Plan which invests one part of your premium to offer life cover, while the other part is invested in a market linked equity, debt and balanced funds to help your money grow and you build a corpus by the time your policy reaches maturity.

Additionally, ULIPs offers you the flexibility to switch between investment plans during the course of the premium payment term. Fund managers assigned to your ULIP Plan are responsible for managing your investment according to the fund type and invest in debt or equity instruments.

3) Multiply earnings by learning about compounding

The biggest dilemma is often deciding on the right avenues to make the investment and most new investors often face it. It is advisable that you start slow by investing in safe yet simple instrument like a fixed deposit. Fixed Deposits are simple to maintain and provide quick liquidity in case of urgent financial exigencies.

The next step is searching for a lender who offers an attractive interest rate and absolute security for your savings. Here is how an FD investment works – Say, you invest Rs.25, 000 in an FD at an interest of 7.35% for 1 year, you will get Rs.1900 as interest at the end of your investment term. And if you chose to invest for 2 years instead, your interest will be Rs.4052, because your interest earnings of Rs.1900 will also be re-invested and added to the corpus of Rs.25,000 in the second year.

4) Start an emergency fund

You never know what life has in store for you, especially in unprecedented tiles like we witness today. Emergencies come unannounced and managing them becomes easy when you have backup, so it always pays to be prepared in advance. Keep aside a contingency fund that can cover your expenses for at least 3-6 months so you can meet such situations with less hassle.

The Perfect Time To Start Investing Is When You Are Young:

The incidents of lifestyle diseased, infections and ailments are increasing in the younger generation. Cases of hypertension, diabetes, obesity, and heart problems are rapidly increasing in people in their 20s. Therefore, there is a greater need to be secured and keeping provisions to ensure your family’s future is secure too. Moreover, age is a major factor that dictates your insurance premiums. So, while you are young and healthy, you’ll be charged lower premiums. So, is there a reason you should not invest in a life insurance right away?

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