Am I saving enough?


The road to saving is simple and the only person who has to navigate and find a way is you. If you are one of those who have the same feeling even after you see yourself religiously salting away your savings all year round, you probably need to give a fresh thought to your saving processes. With a precise objective, it will be easier for you to resist the temptation to spend. Keep aside at least three months’ salary in your savings account to meet any financial exigencies. It is not necessary to become financial experts, but it is important to be aware of financial concepts.

Why save?

Saving is all about the future, about anticipating and preparing for possible risks and emergencies, preparing for upcoming events and expenditures. Many people look at their finances and become discouraged because they can not save a lot right now. Developing the habit will ensure that you will set money aside, and as you begin to make more money, you can set more of it aside.

How much to save?

It is only when you save money that you can invest in options such as fixed deposits, public provident funds, stocks, mutual funds, insurance, real estate and gold to create a future income for meeting small and large requirements, such as education and marriage of your children and your retirement. While it is necessary to prepare for the future, current needs also have to be taken care of. On the other hand, a surplus could result because of too much sacrificing the present for the future. Clearly striking a balance between the present and the future holds the key.

The life stages and the saving patterns:

If you start savings from the age of twenty five, when you are likely to be in your first ob, you can begin with saving ten per cent of your net income till the age of thirty , by which time till you are likely to be married. Step up your savings to twenty per cent in your thirties, thirty per cent in your forties, and finally, fifty per cent in your fifties.

For late bloomers assuming you start at the age of thirty five, you can begin this game of catch-up by saving thirty per cent of your post-tax income till forty. For final chargers, if you have not been able to saving till age forty five, you better hear the last and final call for the savings flight. Till the age of fifty, you will have to jet at forty per cent of your net income, followed by fifty per cent of net income in your fifties.

In your fifties you could have to bear big expenses such as higher education and marriage of children, besides relocation preparation for retirement. You can also step on the gas when the big-ticket expenses get over and reinvest the residual savings.

Where to invest?

Given the fact that tax-saving investments are mostly long term products with different lock-in periods, it makes sense to earmark them for long-term goals. One can avail tax benefits for prepaying the principal amount towards the home loan as principal repayments quality.

Once you have settled your asset allocation mix, decide which share, mutual fund or insurance plan you want to own. While doing so remember to be diversified as far as possible in terms of companies, industries or even countries. Life insurance is another option, investing in which gives a feeling of security of savings. All the instruments need a regular influx of funds till the end of the term.