What’s the best way to allocate my first job earnings across savings, insurance, and investments?

I have recently started my first job with a take-home salary of Rs 50,000 per month. With company accommodation and insurance coverage for my family, my personal expenses are around Rs 5,000–8,000, and I remit Rs 10,000 to my parents, leaving substantial monthly savings. I am seeking guidance on how to structure these savings effectively. What is the optimal allocation between an emergency fund, mutual funds, stocks, fixed deposits, or other instruments? Should I start contributing to long-term retirement options like PPF or NPS early on? I am looking for a strategic investment plan to maximize wealth creation while managing risk from the outset.

Advice by Akhil Rathi, Head – Financial Advisory at 1 Finance

Yes, wealth creation should be a priority, but before that, building a solid financial foundation is crucial.

1. The first step is to set up an emergency fund covering at least six months of your living expenses and commitments, including the support you provide to your parents. 

2. Health cover: Even though your employer provides health insurance, it’s wise to take a personal health cover and a basic life insurance policy early on. Employers often provide corporate health insurance as a convenient safety net for employees—and sometimes for their immediate family members as well. While this benefit offers basic medical coverage, relying solely on it may not be the most financially prudent approach, especially in the face of rising healthcare costs, which are increasing by 10-15% annually. Corporate plans typically come with limitations, exclusions, and sub-limits that could leave employees exposed to substantial out-of-pocket expenses during a major medical event.

One key consideration is that employer-provided health insurance is inherently temporary. Coverage is tied to your employment status, meaning it ends when you resign, retire, or are terminated. During a transition between jobs, there is no guarantee that your new employer’s insurance will offer the same benefits—or cover additional family members, such as aging parents. This gap can result in unexpected financial burdens during critical times.

Moreover, as individuals age, premiums for health insurance tend to rise significantly. Securing an individual health policy at a younger age can lock in lower premiums and ensure continuity of coverage, irrespective of changes in employment. While corporate plans can be supplemented with a super top-up plan to extend coverage, it is important to note that in the event of job loss, you would be responsible for paying the deductible or any uncovered claims out of pocket. For instance, multiple hospitalizations requiring Rs 5 lakh each could quickly become a financial strain.

Another consideration is the scope of corporate plans. Many exclude certain treatments, pre-existing conditions, or outpatient procedures, leaving employees to shoulder additional costs. Individual health insurance policies, on the other hand, provide the flexibility to choose coverage limits, include family members, and customize benefits according to personal healthcare needs. This ensures protection against unforeseen situations and prevents you from dipping into your savings or investments in case of emergencies. 

Once the foundation is in place, you can strategically deploy your savings. For short-term goals, fixed deposits or liquid funds can provide stability and easy access. 

3. Long-term investment
For long-term wealth creation, equity mutual funds through SIPs are a smart choice, given your young age and ability to take on higher risk. Retirement-focused instruments like NPS can also be started early to benefit from compounding over decades. The idea is to balance liquidity, safety, and growth—gradually shifting surplus towards equity for long-term wealth, while keeping a portion safe for immediate needs.