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  • Category: Miscellaneous

    How much percentage of our earnings we should spend?

    In our country with increasing population and increasing number of people going for higher education there is a big number of unemployed people and many of them are employed in much smaller jobs as compared to their educational credentials. This is a tough situation and going to be more tough in the coming times as the computerisation and atomisation may reduce the jobs further. The Govt also cannot afford to keep people in positions just to employ them or engage them. That glorious time has gone. In this situation what is your take on spending? We earn money by hard work and if we spend that in luxurious indulgences then tomorrow we ourselves will be in a bad financial condition. What do the members think about it? How much percentage of our earnings we can spend and how much we should save for a rainy day? Please give your opinion.
  • #721779
    There is no hard and fast rule as to how much percentage has to be spent out of our earnings. But we must make certain provisions for the fixed expenses monthly. Like Rent, current, provisions, fruits and vegetables, school or college fees, petrol expenses and even medical expenses. All these have to be met and cannot be postponed or cancelled. And over and above this if some amount is available, please save for the future emergencies and as per me the average expenses for the middle class family per person works out to 7000 per month and if four are there in the family the total expenses would be 28000 bare minimum and it has to be seen as to how many members are earning and what are their contributions to the family. But savings has become negligible these days owing to cost of living and ever inreasing prices.
    K Mohan @ Moga
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #721780
    Mohan, how you have worked out this figure of Rs 7000 per person per month for an average middle class family is known better to you only but surprisingly my figure is also in that range only. An average middle class family which is not going for any extra indulgences will require about Rs 30000 to 40000 for monthly expenditures. Let us now say that even if the total earning of the household is Rs 60000 per month then they will be save almost 30-35% every month. I strongly feel that this is the bare minimum percentage that a person or family should invariable save for future and invest it in good saving schemes. I have seen some security guards and drivers here who are earning in the range Rs 10000 to 15000 per month and by living in shared rooms and self cooking they are able to save Rs 3000 to 4000 per month and sending that amount every month to their families stationed elsewhere. So whether earning more or less the rule of 30-35% saving has to be followed religiously. High earning members belonging to upper class can always achieve it. In fact high earning people can save much more even up to 60-70% if they like to do so.
    Knowledge is power.

  • #721788
    It Is wise to spend car lesser than ever before. When I was in a good job and had some money to spare, I chose to invest in 10 year RDs. The interest rate was 9 percent or more. Even RDs for as less as Rs50 have now come handy to manage my expenses.

    As a thumb rule, please do try to limit expenses to 60 percent of one's earnings. Go in only for term insurance policies to protect the family. LIC is not an investment. LIC is only for protection. This is one vital difference that most people fail to notice.

    The best option is to invest just 10 percent of one's possible savings and then invest the rest in FDs and RDs. However, from wherever you are living, if there are housing plots available for cheaper affordable rates like a 2400 sq. Ft plot for five lakh rupees one can even withdraw 50 percent from PF and manage the rest through jewel loans. Now is the time to invest in land, even if the distance is some 15 or 20 Kms from the city centre. The reason is simple. All future developments will happen in such areas.

    And never forget the PPF vehicle where everything is tax-free at the moment. Let us hope the FM does something better for the middle class at least now. With petrol costing Rs90 per litre, the middle classes will never be happy at all. Save at least 40 percent.

  • #721791
    I sincerely advice not to go for investment in land or house. It will be very difficult to dispose of the land and houses as real estate business has gone down. It would become a dead investment and won't fetch you the returns as expected like in the old days. Many flats are lying vacant, and the builders are at heavy loss.

    One can try to save their earning by investing in gold and mutual funds.

    No life without Sun

  • #721793
    We are in this age where precarious situation is prevalent for all. Unemployment, price hike, Expensive health care system, expensive education system, unexpected financial problems are standing. Some sections of society have no big problems but some sections are not in good shape to keep their families surviving.

    We should try to save maximum amount. It can't said be said how much we can save but try to maximise it. Insurance of property has become a necessity of the day, especially, for certain sections of the society. We don't know what happens tomorrow. We are undergoing bad phase of life. Probably, worst time is still to come. Let our homes be fixed before it starts rain.

  • #721801
    It is always better to decide on the savings and then plan the expenditure based on the remaining amount. The percentage depends on income levels. I feel a minimum of 35% of our income should be reserved for savings and the remaining should be used for our expenses. But it may not be possible for all whose income levels are less.
    But people who are earning more can plan for higher savings.
    Even people who earn less also should plan for minimum savings. But we should not spend completely whatever we earn. My father always telling us about the importance of savings. He used to tell me that if we have a rupee with us, we should save 10 paise and the remaining 90 paise can be spent. He used to follow the same rule. As his salary was low and expenses are more he fixed that 10% saving for himself. But he never deviated from that 10% saving pattern.

    always confident

  • #721820
    Saving can be our habit provided we think seriously regarding this aspect. Though I accept that the prices of all the essential commodities including vegetables have gone up as high as 40 percent. Moreover there has been wage reductions for most of the employees working in schools, guards working in flats and the IT personnels in the wake of corona phase.
    Hence the situation seems to be very tough having little scopes for low earners. However, whenever there is a will there is a way. People have to work out their home exercise and should analyse the scopes where the savings could be effected. Just take the instance of car driving and in the present phase, when the price of the petrol has soared to around Rs 90/-, sharing of cars between the two employees could be justified. Limiting outings could enhance savings. In nut shells, a prudent analysis would work better in maximising savings.

  • #721918
    The percentage of earnings to be saved depends on the status of the person. If we simply divide the people in three categories that is upper class, middle class, and lower class then the upper class which has significant paternal property need to save only 10-20% of the earning and may be less than that. The middle class has to save at least 30-35% as everything depends on that saving only, later in life. The lower class need not to go for so many show offs and formalities as the middle and upper class are having and it should save 70-80% of its earnings as that is the only way to reach the middle class level in 15 to 20 years of struggle.
    Knowledge is power.

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