29 Sep 2014

What Percentage of My Income Should I Save?

Let us rephrase that question. What is the percentage of income that you should NOT be spending? 10%,  20%, 30% .....can it go as high as 50%?

The answer lies within you. Be true to yourself about income, expenditure and savings. So how does one get started?

1. Save as soon as you get your salary
The best way to do this is to start a recurring deposit or an SIP and stash away some money as soon as you receive your salary. Things that get deducted before you get your salary seem "non existent" which means that savings will grow leaps and bounds.

2. Jot It Down
Write down every penny you spend. This will help you track what unnecessary expenditure can be eliminated.

3. At The End
 If there is money left at month end, it should go towards savings or should be invested. You already have a head start and can boost the initial savings made at the beginning of the month.

So what percentage should I really save?
1. In Your Twenties
If this is your first job or you just started out, try and see if you can stash away 50% of your take home salary. These are the years when one wants to enjoy and reap the benefits after having studied the long hours in college. Stashing away 50% might seem a lot in the beginning and if it does not work, simply bring down the percentage.

2. In Your Thirties
By this time, your income has grown and so have your responsibilities. You will have a better sense of putting money away and investing in different products. Try and achieve as high a percentage as possible after paying all EMIs and accounting for all expenses.

3. In Your Forties, Fifties and Sixties
Income is at its peak and so should your savings. Stash away extra bonuses and raises. This will make a huge difference.

Do I Have To Commit To A Percentage? 
Saving 10% of your income should be a starting point. There will be good and bad months but try and stick to the target. Steadily increase the percentage you save at your pace.

Remember, small savings make a big difference.

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