As someone who works in a start-up, you are no stranger to risk. As a start-up employee you are a different breed who probably likes to chart a different path. The price for choosing a start-up life, though, is the additional stress from work and uncertainty.
While there are a lot of work related stress factors such as late nights or steep targets that we can’t do much about, but there is one area you can address with some simple rules. The area in question is your financial situation.
Here are some simple guidelines you can follow to avoid suffering from financial stress if you work in a start-up.
#1. Avoid taking home loans, and especially car loans, on EMIs during the first few months
Start-ups may pay better than industry standard salaries. This doesn’t mean that you are suddenly ready to afford the home or car you have always wanted. A start-up comes with higher than average reward as well as risk for all those who work for it. You salary may increase or it may even decrease depending on how your start-up ends up performing.
You must give it a minimum of 6 months after joining a start-up, before you make a major commitment such as buying property. You must remember that your EMIs will recur monthly, regardless of your employment status, therefore, you should be wary before you sign up for a long-term pledge such as a home loan.
#2. Limit your credit card expenses
Credit cards can be dangerous illusions. What you consider a deferred payment, can actually become a heap of high interest debt, if left unpaid. Ensure that your credit card bill does not exceed 30% of your take home pay every month. When your salary is certain, only then credit card expenses can be certain too. In a start-up this is a key rule to follow.
#3. Use Emergency Fund as a cushion
An Emergency Fund can act like your parachute. Whether working at a start-up or otherwise, you must be in the habit of saving some percentage of your salary. A good figure is 20%.
The idea is to save 3-6 months of your expenses, which acts as your emergency fund. This money can either be in a Recurring Deposit or a short term Debt Mutual Fund. Having this emergency fund should be a top priority as soon as you join a start-up as it is the best insurance against bad times in your job.
#4. Health Insurance is a must
As a working professional, you must get health insurance. Do not depend entirely on your employer for this, as you can never be prepared enough for a medical emergency. Your company insurance might or might not be enough for real medical emergencies. Make sure you have back-up coverage for yourself and your dependents.