A wise man’s job: First things to do after getting a job

A wise man’s job: First things to do after getting a job Congratulations on landing your first job. You have just joined 23% of the salaried workforce of India! Warren Buffet once said,

“Someone’s sitting in the shade today because someone has planted it a long time ago.”
— Warren Buffett

The LHS rule - Life Insurance, Health Insurance and Systematic Investment Plan. A simple yet powerful rule to make you financially stronger.

Soon after we land a job, these are the things we should start as early as possible. While celebrations are important, it is equally important to set out financial foundations correctly and early. One should remember that the earlier we sow, the better we reap.

Buying a term insurance As we are evolving, the days in which we die are also evolving in the same way. No one ever plans to use life insurance, but the purpose is to protect, not to profit. The motto should be simple: Pay and forget. Everyone aspires to be with their family, kids, watch their accomplishments, finish our responsibilities, guide our kids, and go on family vacations, solo trips. But if something unexpected happens, our absence shouldn’t leave our family financially and mentally vulnerable. This is where Term insurance kicks in. Term insurance is all about being prepared. The insurance company pays the sum assured as per your plan to your nominee. This money is exempt from tax as per Section 10(10D) of the IT Act. This can act as leverage for our family in the event of our absence. Hence, getting term insurance is a must. Premiums are low when you're young and healthy. For example, a 25-year-old can get ₹1 crore coverage for less than ₹800/month. Hence, buying early is a good decision.

Buying a health insurance In India, 62% of healthcare expenses are out-of-pocket expenses(OOP). Also, the percentage of people in India covered under health insurance is below 40%. When we are among the middle class, a huge health expenditure might cost us years of saving. It is a wise decision to invest in health insurance as early as we can to save from the OOP and savings exhaustion. This whole blog is not to refer any health insurance but to educate people about planning their finances. One important thing that is highly neglected is Maternal Insurance. These days, a normal delivery in a private corporate hospital costs anywhere between 1.5-2.0 lakhs. If there are any complications and they have to undergo a cesarean, it would cost even more, up to 5- 8 lakhs. Along with this, many insurance policies have a waiting period of 2- 5 years to be eligible for maternity coverage. This means that even if you marry at 26 and get pregnant in the next 2 years, the expenses would exhaust your savings. That is why starting early matters. This might sound biased, but it’s an overlooked truth that women often benefit more from early health insurance due to maternity-related clauses and waiting periods.

Systematic Investment Plan Ever heard the saying, ‘Your money should work even while you sleep’? And that is exactly what these would do. These SIPs would leverage the power of compounding and rupee averaging to make your money grow in the long term. Your money should grow at a rate faster than the inflation rate (currently at ~6.5%). Many good funds have generated good returns over time, like the Paragpareikh Flexicap fund, Motilal Oswal Mid Cap fund, Axis Bluechip fund, etc. Historically, data shows many equity funds have returned over 12% - 13% returns. These mutual funds work with those who are not that good with markets and investment strategies. But we can also invest in stocks, which is also a very good plan if we learn, research and invest systematically. They will generate good returns as well as keep you safe and diversified, harnessing the power of compounding.

All in all, we just want to make you learn the basics of finances and investments every person should do without fail so that they would not be thrown into poverty with a single financial mistake. Avoid lifestyle inflation. Your income will grow, but your expenses don’t need to rise with it. Stay grounded. Happy Investing!