I landed up in my first job back in 2015 as soon as my college ended. Soon enough, I had my first salary in hand. Knowing the fact that, square of length of hypotenuse is equivalent to the sum of squares of other two sides was really handy in managing whatever meagre sum I used to earn. Sarcasm aside, I spent all my money in buying stuff I always wanted but never could. I kept on thinking that I’ll imbibe the financial discipline in forthcoming salaries and this new charm of independence will wear off. Never had I been so wrong! After going bankrupt by the 20th of each month, it took me almost 18 months to understand the importance of personal finance in one’s life.
In this post, I want to share my top financial blunders I committed in this journey so far!
So it all began with my grandfather who is an ex-banker. Having fixed and just enough income to survive, my father couldn’t enjoy those luxuries in his childhood. He was always questioned and often denied of some basic expenses he sought as a kid. As soon as he started his earning journey, he made it a point that his kids will never face this situation. Lo and Behold, me and my brother were typical brats. We demanded something and there it was. We were never involved in money matters whenever situation was grim and ever since I developed that habit spending without giving a second thought. Only when I started earning myself, I realized that this hasn’t been a cakewalk for my dad. So what all things triggered this thought? Revelation time!
One of the biggest triggers in the financial independence is owning a credit card. Come on, government of India, Banking system of the country has got your back right? They believe in you. I got my first credit card within a couple of months of my first job and hence began the era of limitless spending. Credit card was my emergency expenditure, party companion, Genie from Aladdin and took care of my basic needs. Sooner than I realized, I maxed out on my card.
Now, instead of knowing that E=MC2, a 45 minute session on debt trap would have been much more handy. Believe it or not, I paid the minimum payment for complete 14 months. So that you know, minimum payment is almost equivalent to the interest the bank levies on your debt. So after 14 months, I tried to evaluate and realized that my principal has not moved at all. I could’ve got it converted to an EMI instead and it would have made much more sense. I cut my credit card in half after getting frustrated with all this just to realize that it won’t improve my situation. Credit cards are NOT evil, it is lack of your financial literacy.
This facet of personal finance is my favorite. I always giggle in embarrassment when I look back to these days. For whole first 2 years of my job, not even once I was sure of the salary that was going to hit my A/c. Each time it came as a surprise to me. Never calculated the taxes, never tracked my quarterly incentives, never cared less about filing returns. What a mess! No matter how tricky this piece is (because it is), you need to get this right in order to take control of your finances. There is no outsourcing, no escape involved here. Just sit down, browse the web, talk to HR, do whatever, exactly like I did about 3 years ago. This has changed my life for good. I can plan better, I am aware of stuff and now if someone asks me what my in-hand salary is, I do have an answer. Finally!
Okay, I won’t lie. But living hand to mouth has a thrill of its own. You don’t have to care about the future (because probably you won’t have one). You give a damn about authorities (of course, you defaulter!) and you can buy whatever you want (till your credit limit allows). But I guess that’s NOT what adulthood is about.
It took me a while to realize that I may not survive with this attitude. Any income apart from my salary in the form of gifts, sidekicks went directly to my debt account. Sad! Also, who will address the elephant called inflation? I surely didn’t. So I grew poorer each day.
Lowest part in my life would surely be the fact when I had to gift something to my brother on his birthday. I wanted to give him cash but as usual I didn’t have any. So I called up my friend who ran a business. I paid him via PayTm (using my CC) and got cash in return. I was so proud of this little gimmick I pulled off, at that time. Now, I am mortified when I think about it.
This is one chapter in personal finance, I think I can never catch up on. There is a significant difference between people who start savings in their early 20s and early 30s. And that time, has now gone. Obviously it is never too late to start, but it always pays off to start early.
Only if someone could tell me that insurance is NOT optional. Both term plan and health cover are an important part of your portfolio. When the time comes, expenditures of this nature have the potential of eating out your entire savings. But what savings? What insurance? I never bothered about both these aspects until I got married. I never knew that health insurance also gives you a tax benefit u/s section 80D. Although I haven’t claimed either of these insurances as of now, but wouldn’t deny that I was walking on thin ice until I had this sorted out. Also, had I done it as soon as I had a job, the premium would’ve been much less.
There is ample of help available for learning personal finance. Internet is flooded with videos, books (My personal favorite is “Rich Dad Poor Dad“) to teach you the same. But it is just you who will implement this. No body is more interested in your future than YOU!
I have talked to many people on this and some or the other blunders mentioned here are quite relatable. Hope this helps you avoid certain pitfalls and give you a head-start in this never ending financial journey.
Until Next Time. . .