Got your first salary? Here’s how to make it work for your future

Have you landed your first job and wondered what to do with that first paycheck? You’re not alone. While it’s tempting to splurge after years of studying or job hunting, the smartest move is to start building good money habits from day one. Think of this phase as laying the foundation for your financial future—what you do now can shape your freedom, security, and opportunities later. Whether it's budgeting, saving, or investing, a few simple decisions early on can set you miles ahead.

Your first job teaches you to earn money; your first investment should teach your money to earn for you. Here’s how you can take control of your money from the very beginning.

Emergency funds: The first salary is often spent on celebration, but the second salary onwards should secure your future. Build your emergency fund like you're preparing for a monsoon - you never know when the financial rains will come, but when they do, you'll be grateful for the umbrella you built in sunshine.

Col Sanjeev Govila (retd), Certified Financial Planner, CEO, Hum Fauji Initiatives, a financial advisory firm, says, “Your emergency fund should cover 6-12 months of expenses, not income. Many investors mistakenly focus on replacing salary, but what matters is covering your actual monthly outflow–rent, EMIs, utilities, and essentials.”

Insurance strategy: Insurance is not an investment product trying to give returns–it's a financial bodyguard that should be invisible when you don't need it and invaluable when you do.

“Start with term life insurance worth 10-15 times your annual income and health insurance with at least ₹5 lakh coverage. I would prefer Rs 10 lakh. Avoid ULIPs and endowment policies–they're like trying to use a spoon as both an eating utensil and a hammer,” said Govila.

Investment approach: Your 20s are your financial teenage years–this is when you can afford to take risks because time is your greatest asset, not your bank balance.

“Follow the 50-30-20 rule with an Indian twist: 50% for needs, 30% for wants, and 20% for wealth building. Within that 20%, allocate 70% to equity mutual funds through SIPs and 30% to debt instruments,” said Govila. The best time to start investing was yesterday; the second-best time is with your next salary credit, suggest experts.

Asset allocation wisdom: Don't put all your financial eggs in one basket, but don't scatter them so widely that you can't keep track of where they are.

According to experts, for new earners, equity exposure should be 100 minus your age. A 25-year-old should have 75% in equity and 25% in debt. Review and rebalance annually, not daily, while reviewing the portfolio half-yearly.

Common mistakes: Avoid these new-earner traps–buying expensive gadgets on EMI, investing in fixed deposits when inflation is eating your returns, and postponing investments until you "earn more. Your spending will always find a way to match your income - make investing non-negotiable from day one.

“The key is starting small but starting smart. Even ₹1,000 monthly SIPs begun at 23 can create more wealth than ₹5,000 monthly SIPs started at 30. A good financial plan is like physical fitness - small, consistent efforts compound into extraordinary results,” says Govila.