Personal finance checklist to put your salary to its best use

Healthy financial habits can go a long way in saving and managing your income and expenses smartly. 
Apr 2023
3 mins read
How to use your salary efficiently
Keeping your money in order might be difficult as your responsibilities and family expands. Healthy financial planning habits established early in one's professional life can go a long way. Being able to handle your salary well entails more than just attempting to make ends meet. The challenge is to figure out how to save a portion of your paycheck while also paying off debts, covering basic living expenditures, and work toward your financial goals. So, if you're looking for pay management tips, you've come to the perfect place.

Retirement saving
The most important thing you can do is to begin saving early. The earlier you begin, the more time your assets will have to grow - and recover from the market correction. It may be difficult to think about or care about retirement if it is decades away. However, starting to save for retirement when you are young is ideal. The sooner you start saving for retirement, the longer you’ll have to take advantage of the power of compounding. Diversification is a fundamental rule when it comes to intelligent investing.
Investing early gives you the opportunity to recover any losses you may make early on in your investment journey. Let us understand this with an example.
Ram starts investing at the age of 30 while Shyam starts at 40. Each of them invest Rs. 10,000 per month. They aim to retire at 55.
By the time they reach their retirement, Ram’s investment has grown more than that of Shyam because of compounding. And that's truly the best way to create wealth over time.

Person Ram Shyam 
Age at the time of the first SIP investment30 years 40 years 
Retirement age55 years55 years
Investment tenure25 yrs 15 yrs 
Total amount invested (INR)30,00,00018,00,000
Rate of interest8%8% 
Final investment amount (INR)95 lakh34 lakh
Build an emergency corpus
Regardless of your age, creating an emergency fund is essential. It provides the buffer to protect your family from income loss or reduction or any unexpected major expenses that can derail your financial security. The thumb rule is to have at least six months to one year of expense saved in a fund or bank account which can be liquidated/withdrawn easily.

Get yourself health and life insurance
Life Insurance & health insurance are complementary, not alternatives. Both medical and life insurance policies provide distinct benefits to policyholders. It is obvious that individuals who are the principal breadwinners must obtain life insurance. The thumb rule is that one needs to have an insurance cover equivalent of 7 to 10 times of annual income. The policyholder should ensure that the coverage they select is adequate to cover their liabilities as well as their household expenses.
Medical emergency can strike any moment. In 2021, India witnessed the highest medical inflation of 14% among Asian countries. As per the official data of the Ministry of Statistics and Programme Implementation, the cost of medical treatment in India went up by 7.21% in April 2022. Astonishingly, 55 million Indians were pushed into poverty in 2017, because of the high out-of-pocket (OOP) health expenses. (Source: Hindu)
The average cost of bypass surgery in India can range anywhere from Rs 2 lakh to Rs 5 lakh. Any medical emergency has the potential to put you under significant strain. Thus, adequate health insurance is a must. A family floater health-care policy has the advantage of providing coverage for the entire family under one policy, making it more affordable than purchasing individual health insurance plans for each member of the family.

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