If you just commissioned or enlisted or joined indthe Indian army (navy, air-force) . here are a few things you should do in the first 6 months of your new job. If you do these things you’ll be ahead of many of peers and you’ll thank yourself immensely down the road when you’ve set yourself up for financial success:
- Find a military friendly, online, fee-free bank: No such a bank is not available now. Just because you are a military person and you are very patriotic, do not expect the same from your bank. I have met senior military people who think that the banks should look after their money. Nice thought. Not true at all. I am sure most of you remember that it took Presidential Intervention for India’s Field Marshal Sam Manekshaw to get his salary arrears. What can be worse? If you think that a banker out of sheer love for his country will not mis-sell a product to you, you are sadly mistaken. They have targets and you are just a well, for want of a better term, a Bakra. Keep looking out for a simple bank with good online facilities. Sadly all the banks that cater to the defence forces sell ULIP and most of the young officers I meet have ULIP in their portfolio.
- Start Learning about Personal Finance: PF, like most fields is about constant learning. For e.g. when many of us in PF education space kept screaming “Take term insurance” the industry came up with a) expensive and complicated riders and b) term insurance with return of premium. Both are terrible products. So PF is a dynamic field, find your sources of learning and keep yourself abreast of the dirty tricks department of most of the players.
- Stay with debit cards, ACTUALLY, stay with cash while spending money: It is always nice to FEEL the pain of spending your HARD EARNED cash when you are buying something. Credit cards and Debit cards make the whole thing cold and impersonal. You do not feel any difference in the pain of spending 500 or 5000. If you must have, get a low limit credit card FREE for life and keep it at home. Make taking the credit card out a difficult and painful process, so that you use it less. Get a debit card, AND REALIZE that it is very dangerous to lose your debit card – somebody can clean out your bank account. Take precautions.
- Track your expenses – there are many online tools – and they have apps too. Get on to them and keep a tab on your expenses. As a student if you did track your expenses, this will come easy. Or it will have to be a new learning. For a person who is taught survival skills in a jungle with being given limited rations, budgeting money should be very easy. Well, even if it is not very easy, it is a skill that you have to learn. Keep a saving target too – try to save about 20% of your take home pay for a start.
- In about 3 months time you will have a surplus – the 20% that you save is lying in your savings account – and this should become a fixed deposit. THIS IS YOUR emergency money, and in any urgent need it should be accessible through your debit card.
- 90 days after you get your first salary look for a mutual fund investment. To start with look for an ELSS fund – Equity Linked Savings Scheme – investing in equities and getting Income tax benefits. Go, make a start. An early start gives you tremendous power of compounding.
- Get yourself a Pure Term Insurance – without any riders, no return of premium, etc. and buy it from the cheapest source. Look at all life insurance companies before you decide. Buy it from a company with which you are comfortable, buy it online, and keep it live for the rest of your term. This should be over and above the small term insurance that the Forces give you.
Once you have done all this keep reading www.subramoney.com and keep learning !!!
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