How much amount should I save every month to meet any of my future needs?
The current corona virus crisis has lead people to think at least one of the things, such as you cannot invite your friends to your house. You cannot go out in your car. You cannot reveal your lifestyle to anyone – the lifestyle which took you around 10-15 years of hard work with a lot of loans. Almost 50% of your expenses are lifestyle expenses, the other 50% of your expenses are normal living expenses. You can often save more than you’re ever thought. So, what can you do to become financially independent that too within your means? Let us divide your salary and check
Emergency Fund - You should have a minimum of 6–12 months of your household expenses to sustain. So, if in case you lose your job, you can sustain for 6–12 months. If you have any monthly EMI for any loan, you must also add that amount in the emergency fund. First, calculate your monthly expenses and then start saving for the emergency fund. Create an emergency fund within a year. You will have to calculate by yourself as to how much you need to save from your salary.
Term Insurance -This is a very straightforward statement but if you die today, will your family be financially dependent on anyone else? If your answer is yes, you must go and purchase term insurance. If you're young, it would not cost you more than 10,000 per annum for a term insurance cover of 1 Crore. You need to save 800–1000 per month from your salary and your family will not be dependent on anyone.
Health Insurance- If anyone of your family members gets hospitalized and the hospital bill is around 10 Lakhs, do you have sufficient money to pay the bill? If the answer is No, go and purchase a health insurance cover of 30 Lakhs with a mix of base health insurance policy and super top-up policy. The policy cost is 15,000 per annum, around 1,200 per month.
If you are not aware of the super top-up policy, please do a Google search?
So, term insurance health insurance will cost you 2,000 per month and you are tension free. So the remaining amount can be invested as per your goals.
(Additionally, you can also add personal accidental policy which will cost you around 1,000 per month for a cover of 1 Crore. You will be benefited by the policy if you met with an accident and unable to work in future, due to serious injuries).
Everyone can save this 3,000 per month but most of the people won't do it. Instead of making their financial life secure, everyone expects returns of 10%-15% on this 3,000.
Let's go to the investment part:
Investments
The financial world is filled with a lot of Gyan. You must always invest first and spend after investing instead of spending first and then investing. Trust me these things do not work unless and until you have clear cut goals in mind.
Let me give you an example- You have started earning and within a span of 6–12 months, your parents start pressurizing you to purchase a home, assuring you that they will make the down payment for the house. You may consider it as an investment and will purchase the home. Now 50% of your salary is going towards paying the loan.
You are now stuck with the home, you cannot think about shifting your career to some other city because you have purchased home. You cannot leave your job to start something of your own because you have loan instalments to be paid.
So, Always Define Your Goals First.
As per your goals, start saving, start investing. After your goals have been defined, you will exactly know how much to save from your salary?
You can also calculate whether you have sufficient amount to save for your goals? You must reduce your goal amount if you do not have a sufficient amount.
You will not be able to purchase a BMW in 2 years if your monthly salary is just 50,000. It is wiser to purchase a Santro after 2 years.
Personal finance is very personal, other than yourself, no one else can tell you how much to save from your salary.
30%/40%/50% is all gyan. You must first define your goals and then start saving for the goals. A well beginning is half done.
