Every month, when the message of salary credit comes in the account, among the long list of expenses, the biggest question that arises is how much money should be saved and invested for the future. In today's era, Mutual Fund Systematic Investment Plan (SIP) has become the most popular means for the common working class to create a big fund by beating inflation. Young professionals from Lucknow, Noida, Bengaluru, Mumbai and across the country are busy preparing for financial security and retirement fund from an early age. However, many people either invest much less than their potential or are overly aggressive and end up in a cash crunch at the end of the month. According to financial experts, there is a scientific and practical parameter to decide the right SIP amount, which depends on the balance of your monthly income, mandatory expenses and financial goals. Golden Rule of 50-30-20: How much part of the salary should go into investment? In the world of personal finance, the rule of 50:30:20 is considered to be the most accurate formula for budget management and investment. Your in-hand (net) monthly salary should be divided into these three parts: 50% Needs: 50% of your total income should be towards house rent/EMI, ration, electricity-water bills, children's school fees and basic medical expenses. 30% Wants: 30% of the income can be used for lifestyle expenses like dining out, movies, shopping, gadgets and weekend trips. 20% Mandatory Savings & Investments: It is mandatory to save and invest at least 20% for the future. Financial advisors suggest that the largest portion of this 20% (around 15% to 20%) should go directly into SIPs of equity or hybrid mutual funds. If you do not have a huge loan on your head, you can also increase this investment portion to 25% to 35% by cutting down on your 'Wants'. Ideal math of monthly SIP as per different salary slabs How much SIP you should aim for every month as per your income can be understood with a simple calculation: ₹30,000 monthly salary: Start SIP with minimum 20% i.e. ₹6,000 per month. It can be divided into large-cap index fund or flexi-cap fund. ₹50,000 Monthly Salary: Invest minimum 20% to 25% i.e. ₹10,000 to ₹12,500 per month. It can be divided into flexi-cap (₹5,000), large and mid-cap (₹4,000) and small-cap (₹2,000). ₹1,00,000 monthly salary: Aim for a SIP of at least 30% i.e. ₹30,000 per month. In this, along with diversified equity funds, some part can also be allocated in debt or ELSS (tax saving). The '15-15-15' Magic Rule of Long Term Wealth Creation The 15-15-15 rule is considered a milestone in explaining the importance of discipline and timing in SIP. According to this rule: If you do a SIP of ₹15,000 per month, continue investing for 15 consecutive years, and get an average expected annual return of 15%, then after 15 years you will have a huge corpus of ₹1,00,27,601 (over Rs 1 crore). In this, your total accumulated capital will be only ₹ 27 lakh, whereas the wealth gain from compounding will be more than ₹ 73 lakh. Step-Up SIP: Increase investment as salary increases Instead of sticking to a fixed SIP amount for years, the smartest strategy is Step-Up SIP. Every year when there is appraisal or increment in your company, direct an annual increase of at least 10% in your SIP amount. For example, if you started with ₹10,000, make it ₹11,000 next year and ₹12,100 the year after that. This small annual increase of 10% almost doubles your final maturity corpus in 20 years compared to a normal SIP. Before starting SIP, keep these 2 things in mind. Before investing the first rupee in mutual fund, it is mandatory to prepare two financial security shields: Emergency Fund: Keep aside an amount equal to at least 6 months of mandatory expenses (ration, rent, EMI) in a savings account or liquid fund, so that there is no need to break the SIP midway in case of job or medical emergency. Term and Health Insurance: For financial protection of the family, take term insurance of at least 15 to 20 times of your annual income and adequate health cover, so that the invested capital remains safe in case of any untoward incident. Growth Projection of ₹10,000 monthly SIP over different time periods (at 12% annualized expected return) Time Frame (Years) Total Deposit Estimated Wealth Gain Total Estimated Fund 5 Years ₹6,00,000 ₹2,24,864 ₹8,24,864 10 Years ₹12,00,000 ₹11,23,391 ₹23,23,391 15 Years ₹18,00,000 ₹32,45,760 ₹50,45,760 20 years ₹24,00,000 ₹75,91,480 ₹99,91,480
