First Job? Build Millions, Start Financial Planning…

Got your first job? Want to plan your finance?

But not able to understand how to start?

No issues. This article can help you THINK financial planning.

People in their first job are generally in their early 20s.

People who start early could be only 21 years of age. Late starters could be as old as 24.

On an average, people in their first job will lie in the age bracket of 21-25 years.

It means, these are really young people.

Till few months back, they were completely dependent on their parents for every penny.

But suddenly, they received their first paycheck from first job. The feeling is great.

It cannot be just explained only in words.

The Joy of First Paycheck

The joy of first paycheck builds up from an amalgamation of several feelings together:

  • Sense of Independence / freedom.
  • Feeling of achievement.
  • Ability to become more valuable for family.
  • Authority of having a bank balance of self etc.

But to top it all, I think, the “sense of independence” is what majority liked the most about their first job.

“Independence / Freedom” are not just words. They are actually a way of life.

A person who lives life with independence, does so as a “choice”.

Yes it is a conscious decision (choice) that the person has made. This decision eventually makes the person “independent”.

We all want to be independent, right?

But is our independence/ freedom guaranteed only if we got a job.

Not really.

The feeling of independence needs fuel

People who live in countries like Norway, Sweden, New Zealand, Denmark, Canada, Ireland, Switzerland, Australia, India, USA, France etc are said to be living in a democratic nation.

Democracy gives us freedom. But are we really free?

Ask a question to people who are in Job for last 2-3 years, “do they feel free?”.

Most of the people will give NO for an answer.

Ask this question to people who are in job for longer period of time.

These people feel even less freedom. Sense of dependency grows with age.

So what happened to that feeling of independence/ freedom that one felt during the initial days of their first job?

It vanishes with time. Why?

Because the feeling of independence needs fuel.

What is the fuel?

Your own wealth.

It is also important here to understand why people feel less independent when they grow older in job.

Do not worry, my answer will be short.

First Job - Financial Planning

Transformation from independence to dependency

First paycheck triggers that feeling of independence/ freedom.

Second paycheck also makes the person happy and assured.

Third paycheck gives more sense of security.

By the time its fourth/fifth/etc paychecks, the person starts to get complacent. How?

This assurance that, every month the paycheck will come, no matter what, makes people complacent.

On one hand this assurance is good, but on other hand it is making people more dependent on their paychecks.

So you see the transformation from “independence” to “dependence”.

What caused it?

Too much reliance on once monthly assured paychecks.

But paychecks are meat for this, right?

So reliance on once paycheck should be a right thing?

The answer is Yes and No.

Lets see why I say so…

Reliance on ones paycheck is good?

As I said, the answer is both Yes and No.

The way we utilise our paycheck, will decide if our reliance on paycheck is good or bad.

So the bigger question is, how one should utilize the monthly paycheck?

  • Good Way – To Build Wealth.
  • Bad Way – To Manage our Daily Expenses.

Not using monthly paychecks for “wealth building” eventually makes the person a slave of his/her job.

So coming back to our topic of financial planning for people in first job, what is the take-away from this discussion?

#1. Use paycheck for Building Wealth?

How to use ones paycheck for effective wealth building?

The keywords are “saving” and “investment”.

But, how to save? How to invest?

How to continue to save and invest for the bigger goal of wealth building?

The answers to these questions can only be found in a “sound financial planning.”

People in their first job must resort to financial planning.

But my suggestion is, do not yet seek expert advice.

Do not spend a dime on getting financial planning done from external source.

The right approach is to do it yourself.

It is not difficult at all. Follow a logical stream of question, your financial planning will lie in front of you.

What are those logic stream of questions?

  1. Why to build wealth?
  2. What are your financial goals?
  3. What is my expense budget? How to track expenses?
  4. How I will manage emergencies in life?
  5. Are you saving taxes sufficiently?
  6. What are your investment options?

If one can answer these eight (8) questions, ones financial life will be sorted.

In this article we are addressing the need of a person who has just seen his /her first job.

Are they aware enough to answer all these tough questions?

This is where this article will help.

It will explain all these questions in a way that it helps individuals to answer it for themselves.

So young men, lets start our journey into financial planning:

#1.1 Why to build wealth?

Wealth building must be done to ensure that the feeling of independence/freedom do not cease to exist.

People who can afford to feel like this are necessarily “Financially Independent” people.

So here we get our next goal of life (I have it for myself)…

“To attain financial independence.”

In a very young age (21-25 years), probably wealth building, financial independence are not a priority at all.

But it is necessary to start the process right at this age.

It takes time to attain financial independence.

A person who is financially independent can afford to retire early.

[Read: How much money is enough to retire]

So building wealth is necessary to attain financial independence. Financial independence will allow a person to retire early.

But why to think about retiring early when you just got your first job?

This doubt is valid today. But let some 1-2 years pass, you will get your answer.

Majority, experienced service class people desire to retire early. Everyone has their own unique reasons to retire early.

But out of all, only less than 1% can actually afford to retire early. Why?

Is it so difficult to retire early?

No. Do you want to know the real reason?

Because they did not start the process of wealth building when they got into their first job.

My estimation is, a normal middle class individual, while in job, needs 20 years to become finically independent.

The earlier one starts, the easier it is to attain the target in 20 years.

The later one starts, the harder it becomes to achieve this target in 20 years.

So first time job seekers, make sure to start building wealth as soon as you get your first paycheck.

[Read: About the power of compounding money]

#1.2 What are my financial goals?

This makes the matter little complicated.

Welcome to the real life.

Till now what we understood that wealth building to be done for the sole purpose of attaining financial independence.

But this is not the only financial goal one can set for life.

It is true that when a person is just 21-25 years of age, gauging all future financial goals is not possible.

Hence we will discuss here few typical financial goals which is bound to come your way in future.

These are typically those expenses which are not only expensive but also in many ways unavoidable:

  • First/Second car purchase.
  • First/Second home purchase.
  • Child Planning.
  • Support to Parents.
  • Retirement (financial independence).

[Read: Financial planning for future needs]

The point is, in addition to early retirement, there are other unavoidable financial needs which also must be addressed.

What does this mean?

For a person who has just got into his/her first job, it means 60% of your paycheck will be consumed to meet these financial goals.

Is it difficult?

People find it hard to save 10% of their salary.

Here we are talking about 60%. No doubt it is tough.

But isn’t wise men are supposed to see the storm much before it strikes?

Do not worry, I am not going to give you only lectures.

It is tough. There are no easy ways out. But there is a way to do it.

What is this way?

Develop a habit of frugal living.

Warren Buffett is one of the worlds richest man. He leads a frugal life.

What is frugal living?

“Frugality means, spending money on only those things which you really need or like.”


If you like reading, buy books.

But if you end up buying a Kindle, ipad, reading desk, fancy book shelf, expensive night lamps etc, this is not frugality.

Hope you got the point.

Here, you are actually overspending.

What happens when we overspend?

We have less spare cash for more important things (that we need or like).

List down things which you really “need and like”.

There will be two separate lists. Now we will see what to do about it…

#1.3 What is my expense budget? How to track expenses?

Create a list of things you really need and you really like.

Once this list is ready, allocate funds to each item in the list.

This process of allocating funds is called budgeting.

Typical example of a frugal Budget is shown below:

First Job - Creating Budget

* 10% on Food means, 10% of ones total take home paycheck is used on food related expenses.

Here, the critical points are as below:

  • Building a list of expense (as per ones frugality).
  • Not spending a dime beyond what is budgeted.
  • Tracking each and every expense you make every day/week/year.

[Read: Building expense tracking software in excel]

#1.4 How I will manage emergencies in life?

You have already budgeted for the following:

  1. Financial Independence.
  2. Other financial goals.

This already consumes 100% of your income.

But what we missed here are emergencies. Emergencies can be of many types.

Few common ones are as below:

  1. Loss of life.
  2. Health issues leading to hospitalisation.
  3. Common sickness to family members.
  4. Damage to vehicle.

What happens when such emergencies strike? There is no financial budget allocated for it?

I have intentionally not created a separate budget for all these to highlight a point.

But first, lets answer how to fund these emergencies…

Save money from each of the above expense categories budgeted above.

This saving will be used to create an emergency fund.

How much to save?

Just save 2.5% from each of the above expense categories.

Yes, only 2.5% will be enough to manage emergencies.

What to do to manage emergencies?

  1. Loss of life – Buy a life insurance policy (term plan).
  2. Health issues leading to hospitalisation – Buy a health insurance.
  3. Common sickness to family members – Keep spare cash in recurring deposit.
  4. Damage to vehicle – Buy a vehicle insurance.
#1.5 Are you saving taxes sufficiently?

Once you have taken care of emergencies, the next step will be to think about income tax savings.

You already have the following to take care of your income tax deductions:

  1. Employee Provident Fund (EPF) – Ask your employer for its details.
  2. Life Insurance Term Plan.
  3. Health insurance policy.

For people in their first job, I think the above will fulfil the tax saving requirements.

How they can save tax for you?

Employee’s contribution to EPF can be claimed as income tax deduction under section 80C.

Annual premium paid towards maintaining a life insurance policy can also be claimed as deduction u/s 80C.

Annual premium paid towards maintaining a health insurance policy can be claimed as deduction u/s 80D.

[Read: Everything about income tax planning]

#1.6 What are your investment options?

At this stage of your life, a wise idea will be to keep ones investment as simple as possible.

Another suggestion is to always remember what is your investment budget, and why are you investing money.

In our above example we have seen that, the investment must be practiced for the following reasons:

  1. Financial Goals (Budget – 30% of income)– create an investment portfolio which eventually funds the individual goals as they arrive.
  2. Retirement (Budget – 24% of income)– create an retirement corpus which ultimately helps you to attain financial independence (and seek early retirement).

[P.Note: The contribution of the Employee’s Provident Fund (EPF) must also be considered within the 24% limit of retirement linked budget]

How to start a simple investment?

Invest your money as following:

  • Use a Systematic Investment Plan (SIP).
  • Invest in a diversified equity fund.
  • Stay invested for 20 years.

[Read: About Systematic Investment Plans (SIPs)]


For a person in first job, thinking about financial planning may be a bit tough.

But take it from me, it is going to get tougher with your age.

The better time to start planning your finances is from today.

The advantage of starting to invest early is huge.

You will thank yourself million times (when you get older) for your decision to invest as stated above.

It is true that the path is not easy.

Not only because, it is difficult to follow, but more because, what you are going to do is different.

Not many people in this world think and save/invest money in this way.

While your friends will be busy buying a new SUV for themselves, you will have to feel contented with a hatchback.

While your friends will be busy planning a vacation in Europe, you will be saving money for your first home.

But there is also a flip side to this story…

You will see this when you and your friends will enter middle ages (above 40s)…

While your friends will be busy in their jobs, drowning under the load of dependencies that they had created for self, your state of affairs will be like this:

  • You would be richer.
  • Financially independent.
  • All major goals of life planned and sorted.
  • Enjoying an independent life in true sense.
Disclaimer: All blog posts of are for information only. No blog posts should be considered as an investment advice or as a recommendation. The user must self-analyze all securities before investing in one.

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