Proper Planning Brightens the Future of Personal Finance

Traditionally Indians are bound to the practice of Savings. There is a deep-rooted sense of

managing the income by spending less and postponing the luxuries of life. But this ‘saving

culture’ has come under threat. The change in mindset is very evident with the youth and

the EMI fixated middle aged salary earners, who are impressed with the easy spending

consumer culture of the west.

But the recent global pandemic has exposed the virtues of savings. Even after pay cuts

people have realised the power of saving money and planning for the future. Today, those

who saved and invested wisely are secure in their lives and livelihood. Their past course of

action brings to light the quintessential question running in everyone’s mind “How much to

Save to plan a secure future”.

The truth be told there is no one size fit all planning strategy for savings. But a general

thumb rule to start saving is to start analysing spendings. 

Income - Expenses = Savings

Spending before saving is a very wrong approach which brings uncertainty to the saving patten.

This leftover savings attitude leads to seldom saving money and doesn’t transpire to a secure or

wealthy future.

Income + Loans = Expenses

People with good income have fallen pray to the crime of over burdening themselves with loans.

Their short sightedness or naive nature sucks them into additional loans to meet the regular

expenses. Only divine intervention can rescue them from such erroneous financial moves.

Income - Savings = Expenses

The correct approach for wealth management is to make savings a constant and premiere. This

approach develops the disciple to save first before spending. There by not only mastering income

management, but also expense management.

How much should be Saved or Invested?

The recommendation to allocate for the savings or investment plan is to get a clear

understanding on the short, medium and long term goals. The start can be as modest as 10% of

the net monthly income and increase it to 30%.

Short term Goals

The goals will materialise in the immediate future with an approximate timeframe of 18 month or

about. These goals will comprise of:

1. Planning for a vacation

2. Purchase of a car

Medium Term Goals

These are intermediate financial goals with a term of 60 months.

1. Creating emergency fund

2. Purchase of a property

Long Term Goals

These are very important goals with 10 years or above.

1. Investing for kids higher education

2. Retirement Planning for self and spouse

3. Creating a corpus for kids grand auspicious wedding

4. Investing to create a huge financial asset

Fixed Monthly Expenses

The bills and expenses that don’t vary much and require a commitment to paying them on a

monthly basis. This should not exceed 30% of the monthly income. These includes rent, groceries,

fees, utilities and eats out with friends and family.

Loans and EMI's

The combined EMIs should never exceed 40% of the total monthly earnings to avoid any kind of

derailments from the other goals. It is here that the temptation to pay in instalments hampers the

joys of the present day. In most cases bankers don’t lend more than 50% of your monthly net income

as EMI.

The path to a bright and secure future depends on many small correct choices made in the present

for saving and investing. There are always turns off uncertainties but that should never stop the

process of preparedness. And its never too late to start the journey of planning.