Akansha Dodeja, a 24-year-old Mumbai-based global markets research analyst at JP Morgan, spent her first paycheck from an internship on household expenditure, gifts, medical expenditure and gave the pending amount to her family. “I used it for expenditures at home and for paying off my education loan," said Dodeja. She will join her new workplace next month and has a list of corrections that she would like to learn from her last experience. “I would like to create a proper outlay of expenditure. Last time, I couldn’t track the exact expenses," she said. She has already completed her taxsaving investment through equity-linked savings scheme (ELSS). Dodeja is using the transition of her first paycheck from an internship to a permanent one to correct her mistakes.
Like her, 25-year old Pune-based Nicky Jain, who is a fixed income research analyst at Crisil said, “My first paycheck was from a temporary job that I took up for a couple of months between my under graduation and post-graduation courses. I had set aside a small portion of the income to create a corpus for an impending trip with my friends," said Jain. But when she got her first paycheck as a professional, Jain wanted to curb the unnecessary expenses and hence, started a systematic investment plan (SIP).
Salaried individuals have the option to invest whatever they earn from their first paycheck but entrepreneurs have to invest it back into their business. Harsh Shah, 23, an engineering drop-outturned-entrepreneur, who is now the founder of Luxor Trails, a Mumbai based adventure trip organiser, invested his first income back into his business. “The first trip I organised was June 2017. As I didn’t have a strong financial backing for my company from any other source, I re-invested all the money I earned from the first trip in my business," he added. Between Luxor Trails’ formal announcement and when Shah received his first earnings, there was a gap of a few months.
There are more millennials who have taken the baton of managing the household from their first paycheck itself. Mumbai-based fitness professional Prachee Passi, 26, got her first paycheck from her first training class in 2015. Being the first earning member of the house, Passi prudently divided her earning to savings and expenditure. “I divided my first paycheck into four parts to make the most of it. The first part was saved for next month’s house rent, as I had moved to a new city when I had secured the job. The second part was used to buy new workout-wear and shoes. With the third part, I bought gifts for my mother and sisters, while the last part went directly into my savings," said Passi.
However, not everyone plans their finances. “Most millennials splurge on non-essential commodities and defer investments for future paychecks. The way to inculcate the discipline of savings and investment is to start setting aside certain amount that you can spare from the first paycheck itself," said Deepali Sen, co-founder, Srujan Financial Advisors.
There is nothing wrong in splurging your first paycheck only if you are confident that you have self-discipline when it comes to managing the finances, said Melvin Joseph, founder, Finvin Financial Planners. “You can aim to save ₹5 lakh till you turn 30 years old, which can be further used for your future goals," said Joseph. “You can also start an SIP in an equity mutual fund and invest small amounts in public provident fund also," he said.
You can start the SIP after analysing your cash-flow through the month and then decide the amount you can put aside for compulsory savings. “You can only reward yourself by saving for tomorrow’s goals such as higher education, buying a house and retirement," said Sen. Even when it comes to gifting, you can start an investment in the recipient’s name if you want to spend wisely.
Start apportioning some amount of your monthly paycheck, first or not, and start building a corpus for your future needs. Consult a financial advisor before you invest in a particular instrument.