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How to Manage Your First Salary and Grow Your Savings

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October 20, 2022


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If you’ve just received your first offer letter and are all set to join your first job, congratulations! You’ve got a good reason to celebrate, but once the initial excitement simmers down, there’s a very important question left — how to manage your salary?

Truth be told, if you’re like most people, you may want to blow most (or all) of it on all the things waiting on your wishlist. This may sound tempting, but it’s not the smartest thing to do. Instead, you can try and save a little bit each month, starting from your first salary. 

If this sounds like a plan, and if you’re eager to learn more about how to manage your salary and save up for the future right from day 1, here’s everything you need to know. 

How to manage your first salary smartly?

Depending on the field you specialise in, your first monthly salary may be anything from Rs. 25,000 to Rs. 2 lakhs or more. That said, the amount you earn has little to do with how you manage your salary. No matter where you may be on the payscale, the tips outlined below can help you save up for your future efficiently.

1. Use a budgeting rule

When it comes to managing your earnings well, preparing a budget is the most fundamental requirement. A budget helps you understand where every penny you earn goes. You can adopt a convenient budgeting rule to save up a small sum each month. 

One of the most popular budgeting rules for beginners is the 50-30-20 rule. Here, you can split your monthly earnings in the following manner —

  • 50% for your needs
  • 30% for your wants
  • 20% for your savings

So, for instance, if you earn Rs. 50,000 per month, you can break up your salary by adopting this rule, as outlined below.

  • 50% or Rs. 25,000 for your needs (like rent, EMI, provisions, fuel costs etc.)
  • 30% or Rs. 15,000 for your wants (like entertainment, movie tickets, eating out etc.)
  • 20% or Rs. 10,000 for your savings 

2. Start an SIP

You don’t need to have a lump sum amount to start your investment journey. An SIP or a Systematic Investment Plan helps you invest small sums in mutual funds every month. When you combine this investment strategy with a budgeting rule like the 50-30-20 rule, you can invest as much as 20% of your monthly income in mutual funds diligently. Depending on your risk profile, you can choose from various options like equity funds, debt funds, hybrid funds or index funds. 

Take the above example, for instance. If you invest even as little as Rs. 10,000 in a mutual fund that offers 10% returns for 10 years straight, you can build a corpus of a little over Rs. 20 lakhs! With moves like this, it becomes possible to manage your salary and save.

3. Build an emergency fund

An emergency fund is crucial if you want to remain debt-free. It helps you be prepared for contingencies you cannot plan for, like a medical emergency, a sudden home repair or a major vehicle repair. 

For example, say that after around 2 years of working, there’s a sudden medical emergency in your family, and you face a huge medical bill to the tune of a few lakhs of rupees. In this case, without an emergency fund, you may have to break into your savings or borrow funds to settle the bill. But if you have a contingency fund, you need not worry about increasing your debt or reducing your savings.

Experts recommend having an emergency fund that is at least 10 times your monthly income, but you can build a more sizable fund if you think you need it. 

4. Invest in life insurance 

Life insurance may not seem like a necessity when you are young, healthy and probably single. But the irony is that if you wait another decade or so (till you are in your 30s) to buy a life cover, your life insurance premiums will likely increase. This is why it is advisable to invest in a life cover when you are young and in good health.

You can start off by purchasing a term plan, which offers a sizable cover at extremely affordable premiums. And then, once you are in your 30s, you can reassess your life insurance requirements and increase your coverage if needed. Having a life cover will ensure that in case something happens to you, your spouse, children, and dependent parents have a financial safety net to protect them.

5. Keep debt to a minimum

Once you start earning your own income, it can be very tempting to swipe your credit card to the maximum limit or give in and make use of that incredible personal loan offer. But even the most robust savings plan may be futile if you have a ton of liabilities to pay each month.

A big part of learning how to manage your first salary involves ensuring that you don’t spend a huge portion of it on debt. Ensure that you do not borrow more money than you can afford to repay. And if you must borrow, prioritise debts that help in asset creation, like home loans. They also offer tax benefits, so you can reduce your tax burden simultaneously while increasing your net worth.


Managing your earnings is a skill that you can easily pick up over time if you have a plan and follow it diligently. The pointers outlined above can help you understand how to manage your first salary and make the most of what you earn. If you are just getting started with cultivating financial discipline, take it easy and focus on what you’re doing right. This way, you will be encouraged to sustain any effective financial habits you possess. In case of minor slip-ups, you can always strive to manage your salary and save better next month.

Frequently Asked Questions

1. Does your first salary matter?

Your first salary does matter to a certain extent since it determines the point from which your payscale begins. That said, it matters more what you do with your first salary. A person who earns more but saves little or nothing each month will be worse off than someone with a lower salary but a better savings plan.

2. How to manage your salary every month?

Learning how to manage your salary and save each month is crucial if you want to secure your future financially. You can start by having a budgeting plan in place and by building an emergency fund. An SIP or a Systematic Investment Plan can also be very useful since it helps you save diligently each month.

3. How to invest your first salary?

Here are some ways to invest your first salary

  1. Start by creating an emergency fund. This investment will help you in times of need and in unprecedented situations.
  2. Consider investing in a tax-saving scheme like a Public Provident Fund (PPF) or an Equity-Linked Saving Scheme (ELSS) to save on taxes and build wealth.
  3. If you have a long-term investment horizon, consider investing in equity mutual funds or exchange-traded funds (ETFs) for higher returns. It's essential to choose a diversified portfolio based on your risk appetite and investment goals.

Remember to do your research and consult with a financial advisor before making any investment decisions.

4. Should I give my first salary to my parents?

Giving your first salary to your parents is an entirely personal decision, while some folks opt for as a sign as a gratitude and love to your parents, others choose to treat their family as a sign of celebration. There's no hard and fast rule about what to do with your first salary, if giving it to your parents seems like the thought you want to go ahead with, then you should opt for it.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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