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How women in their first job can take control of their money matters

Make sure, your take-home pay is enough to meet at least your non-negotiable expenses

February 25, 2022 / 12:11 PM IST

Radhika Dave, 23, completed her graduation in the architecture stream and lives in Mumbai. She started her professional career with a private firm in mid-April 2021. Unfortunately, she didn’t bargain well enough.

Dave says that her salary included a large component of variable pay (the part that gets paid only if some conditions are met, like if the company makes profits and so on) that significantly reduced her monthly take-home pay. That wasn’t enough to take care of her monthly expenses. “I was surprised,” she says.

That is the first of many financial mistakes that most of us make at the start of our careers. For women especially, such financial mistakes turn out to be costlier.

Look at your salary, learn to bargain

When you get your offer letter in hand, make sure that the variable component of your salary is at a minimum. Try and maximise your take-home pay. At organisations, variable pay is performance-linked incentive, based on achieving specified targets. “As a fresher and lack of experience, you may not immediately be able to achieve these set targets in order to get your maximum variable pay,” says Rati Shetty, Chief Product Officer of


Don’t get lured by attractive sign-on bonuses. “Such bonuses are just one-time bonanza that will not happen in the subsequent years of your employment, so your overall pay will be lower,” says Shetty.

Freshers might also have to repay education loan. Make sure, your take-home pay is enough to meet at least your non-negotiable expenses. “Negotiate for higher basic pay in the salary structure. Basic pay that is 50 percent or more than your total gross salary means there’ll be more going into your employee provident fund (EPF), helping you grow your retirement savings from the very beginning,” says Shetty.

Build a contingency fund

The contingency fund is for major emergencies, such as an unexpected job loss or medical crisis in the situation like COVID-19 pandemic. Ideally, 3-6 months of monthly expenses is sufficient for contingency fund, but look at your particular needs and expenses on dependent then calculate how big your corpus needs to be.

Despite low take-home pay, Dave saved consistently every month and resist the temptation to dip into this kitty until and unless there’s an emergency. Dave has learned from her parents that don’t dip into emergency corpus just because you have run out of cash at the end of the month and she now follows it rigorously.

Create a monthly budget and stick to it. It should cover your monthly standard payments and expenses. This will help you spend more mindfully, prioritising your needs over wants.

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Do not depend on your employer’s cover

Evaluate your employer on the health insurance cover they provide and see if it is sufficient for your requirements. “However, do not depend only on health insurance offered by the employer. Get your own personal cover for yourself and your family,” says Shetty. It’s important to understand benefits offered on health insurance from the employer. Also, buy a separate critical illness cover for self and dependent’s in the family. Terminal critical illness treatment practically wipes out all the assets in the family.

“Have a term life cover equivalent to 15-20 times your dependent family’s annual expenses and include education loan, personal loan, etc. outstanding liabilities,” says Priyesh Sampat, Head Strategic Solutions, Sampat Investments. At a younger age, your premiums are lower. “Keep insurance and investments separate. Do not buy insurance solely to save on tax. You will end up with poor returns and very little protection,” says Shetty.

Start saving

Pune-based Priyanka Trivedi, 26, takes her own investment decisions and follows a goal-linked investment planning approach that she picked up from her father. She has been saving for three goals already; a post-graduate education, a foreign holiday and her wedding. “I prefer discussing the investment avenues and amount with my father,” says Trivedi who insists that the final decision is hers.

Shyam Sunder, Managing Director of PeakAlpha Investment Services says, “Youngsters should invest at least 50-60 per cent of their monthly income after starting on a job. They can utilise the balance amount for monthly expenses, repay education loan EMIs, credit card dues, etc.

“If you are saving for short-term goals of 1-2 years tenure, stick to recurring deposits with banks. While they may not be the most tax-effective, they offer excellent capital protection,” says Shetty.

“While saving for a long-term goals, allocate at least 50 to 70% of your saving towards growth assets like equities and get the benefit from the power of compounding,” says Sampat. Most financial planner advices, millennial investors should begin investing in large-cap or index funds and then diversify to multi-cap or mid-cap funds as per their risk appetite. Review your investments periodically and re-balance the portfolio.

Draw a repayment plan for education loan

Trivedi had an education loan of Rs 3 lakh after completing graduation program in 2019. She kept repaying the education loan as a priority. She completed the repayment of education loan by mid-2020 from savings and annual bonus. “Prepayment of education loan brought down the overall interest cost and I am now debt free,” says Trivedi.

Shetty urges youngsters and first-time job seekers to prioritise their education loan repayment. “Also, check your credit report at least once a quarter to ensure it’s processed on time and there are no defaults or delinquencies reported,” says Shetty.

Go easy on credit cards and buy now, pay later schemes

First salaries give us the freedom to spend, sometimes spend a bit too much. The latest brands, personal care, the latest iPhone, the list can go on. “Spend, but avoid splurging. Avoid buying on credit EMIs and buy now, pay later schemes; they are traps,” says Shetty.

In case you shop through multiple credit cards and buy now, pay later schemes, you cannot keep a track of outstanding credit. This could lead to over-spending and a poor credit score because of defaults or delay in repayment. To avoid this, make a shopping list and keep accounts so you know how much money goes where and towards what purchase.

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Hiral Thanawala is a personal finance journalist with 9 years of reporting experience. Based in Mumbai, he covers financial planning, banking and fintech segments from personal finance team for Moneycontrol.
first published: Feb 25, 2022 09:00 am
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