Where does my money go?
‘I earn Rs. 15L CTC – and clearly I am overpaid. However I am not able to save a rupee – I have no idea where my money goes’
Can you believe this…if you are a middle class Indian?
I found it a little amusing…but not difficult to believe. When I spoke to him, I just heard some of his expenses – Rs. 3000 for a gift for a colleague’s wedding, EMI on a car, and EMI on a motorcycle. Rented house – supporting his parents so paying Rs. 23,000 as rent.
These were too adhoc, so I did not want to be judgmental. So I asked him to maintain accounts for at least a couple of months before I could comment….and here are the expenses:
| take home | 84000 | |
| misc | 23000 | household |
| emi car | 12000 | |
| emi bike | 7500 | |
| petrol | 5500 | |
| investing | 7000 | 80C |
| Personal exp | 6000 | |
| rent | 23000 | |
i was not as stunned to see this. This guy is about 28 years of age – works as an accountant – and as he himself admits, he is well paid. He is still a bachelor, says he is not a big spender – and has ZERO savings – except for some mutual funds (80C), nsc, and ppf.
I said my life style is very different, cannot comment on yours.
However readers are welcome to comment. He reads my blog….:-)
Jsan
The future of this guy looks quite tough as he is not even married but still is not able to save anything at the end of the month. About 25% in EMI for vehicles is quite a big proportion. I think he should sell his car, pay up his Bike loan and save on Petrol. Use Public transport for Self travel, Use taxi for Family travel. This is just a small advice, many more can be added depending on the components of Misc expenses.
Karthik
Subra Sir,
On lighter note , we should not be too tough on him. He is still single. Hi saving will improve once he gets trapped in Marriage. Thats what happened to me :).
l1nu5r
looking at petrol expenditure, either he commutes 30-40km a day and possibly under use either car or bike. 2 EMI is over kill?
assuming his parents lives with him 23k rent may be justified, I have no experience about Mumbai real estate
23k misc household, he’s more than middle class. no comment on his life style
has an girl friend?
hari
1] A good 2bhk available at AIROLI in navi mumbai for 12k, no need to spend 23k.
2] If parents are healty, sell the car retain bike.
3] Start commuting by public transport
with this savings would be 13k from HRA, 12k for selling car,petrol 4k – total 28k net
4] Start SIP – 5k in IDFC index fund – operating cost is 0.25%.
and remaining 20k should be invested in RD. This RD to be redeemed to invest when markets godown to say nifty 4200 to 4500, or for his marriage – no need to demand hefty dahege [ dowry]
5] Since markets are down, proceedings of car sale should be invested in above mutual fund and must get one term insurance of min 50 L.
This would work fine and would provide money to keep his wife financeally secured.
Milind N
Looking Positivly ,he is doing 2 things which are right already.
1.He is Reading Subra and understanding that something need to change
2.He is willing to accept that he may be wrong at an age of 28 when most of us might have felt ,that the WHOLE WORLD IS WRONG EXCEPT WE
What can He do
1. Think before you spend
2.Even with some mistakes ,time is with you.Use it for COMPOUNDING
3.Learn to say “NO” and learn Delayed Gratification .
4.If He is dreaming of Retiring early as many do ,Learn living Frugally
Ensure Proper Term Insurance ,Seperate Mediclaim of 5 lacs each for his parents and himself….it will help him 10 years Hence in terms of Money spent on Probable Expensive Hospitalization of Parents(I wish Them Good Health always)
5.Do keep an years money for Emergencies which visit without Notice
6.Start creating Retirement corpous in Growth Asset .Time is on Your side ,Give your Money to a competent MF Manager Like Prashat or Sandeep or Approva . For a Nice corpous ,commitment at your age is easily possible…. If he is planning to marry ,start creating Education corpous .Sooner the better as Education Inflation is much higher than Officila inflation which is around 12 percent
7.Do asset allocation with Limited exposure to Debt like PPF and Gold ETF .
8.Every Year Visit your Asset allocation,Term cover coverage and make necessary changes
9.Give atleast 2 percent of your income to Genuinly needy people .Visit Give India,Akshay Patra( Those who read Subra must have read abt it and might have contributed already.Thx subra)Your Money is well spent and you will never feel guilty about it
10.Leverage sensibally …restricting emis for all consumption to Max 30 percent .Read Subra sirs story of a Person who got caught with Lifes Twist at age 53…Is he alone …No My Friend.Let it be learning to all “Angry Young Men and women” who want only the King size of all things.
11.Above all count your Blessings.Good Luck my Friend
Naresh
1. Sell the current car and buy a used diesel car which is in good condition.
2. close the current bike loan and buy a smaller bike (costing max 70k) with two months savings.
3. live close to the office aka reduce the commuting distance (savings on gas, time, traffic etc..)
4. don’t use car for outside travel if going alone use public transport instead.
5. if shopping is more like addict (seems from his way of spending), buy things which do not depreciate at least like gold.
6. do a mandatory investment of 40% in MFs, RDs, PPFs then spend the remaining amount.
7. take term insurance & family floater for atleast 5 lacs.
8. have emergency fund of 3 months salary aside.
9. cut the unnecessary expenses like and take required only (eg instead of unlimited internet connection take 10 GB connection instead)
10. most important eat at home and do exercise stay healthy which gives the power to do the above (using public transport, walking capability etc…)
Sanjay
He is saving a decent amount. Nearly 85K in 80C. And I am sure that he must be having EPF contribution of over 1L. Otherwise, there is big disconnect between his CTC and take home.
He has only short term liabilities of vehicle loans. This asset liability mismatch will soon go away. So no need to worry. Look into distant future and don’t take costly actions like selling vehicles.
Household and personal expenditure combined should not exceed 23K. This is one area to save. This is again a short term goal till vehicle loans are paid.
Barun Chowdhury
Hi,
1. His bike emi should end in another 5-6 months. Hence another 7500 will be saved. In that case, 7500+7000(80C)+Some PF in each month is not great. But not too bad.
2. On expenditure side, I believe he should have more carefull while buying his car. Should have make more downpayment for lesser EMI or choose an affordable car.
3. On other expenditures I can’t see any surprise.
Thanks
Barun
Srinivas Muthadi
No problem. He can see some savings once his EMI’s are done.
Ajay
One thing he should do is marry wisely.
Marry a working girl and forget about dowry.
That would result in significant savings even if the expenses remains same.
pravin
check the 23k miscellaneous: how much of it is Tata sky -full package,3g internet, 3 newspapers he doesnt have time to read.
pravin
the bike EMI – i am not aware how long bike EMIs run, but clearly even if it is 3 years seems to be a high end bike.clearly indulging in a passion here.
lifestyle change needed OR double income needed.and hopefully the wife is not a spender too
casper
My case (not boasting, just saying)
——————————
CTC – 16 L
Take home – 90K
Rent – 11K
Food – 4K (eat out)
Travel – 1.5 K (auto)
Misc Personal Exp avg including clothes etc – 2.5K
LIC – 1K (taken long back when i didnt know investing)
Total Exp – 20K
Savings – 70K
Age – 33
EMI = 0
Parents = 0 (they have pension/savings etc)
Marital status – Single
Investments – i invest everything else in equity MF, slowly moving cash/everything to equity MF *SIP* (thanks to Subra)
*Cash/Equity MF/Debt MF/FD/ETF* Savings in 12 years (*excluding* PF) – 47 L
(sadly i saved every penny, didnt *invest*, thanks to Subra, investing from last 3 years)
By Subra sir’s Blessings hoping to reach few crores in next 10 years via investing.
Ajay
As evident from data, having debt results in no savings.
Its surprising that a person is simultaneously paying EMI for two vehicles.
I am planning to buy a car, and thought of EMI scares hell out of me even I could pay half the price in Downpayment.
Easy money in form of EMI leads us to purchase things beyound our means.
For that reason I have decided to buy a less costly car on down-payment only. Of course I will take small interest free loan from my employer.
anon
Not bad at all for 28. Compounding is king.
(I was still studying at that age, and then began with a princely sal of 1000 pm)
Pravin has a point, how much of that 23 K is absolutely required?
There must have been some logic in both car plus bike? Plus fuel plus parking.
pravin
casper ,you can eat out 3 times a day for 30 days at 4k? i am moving to your city.
T.S.Ashok
Hey bhaiya, what is this..you are totally out of control.. misc Rs.23k??? what u are buying??all use and throw materials?? paying Rent of Rs.23k??? what is this..
Please try following things..
1.whenever you get the sal, immediately transfer the amount Rs.36K transfer to some of your SB account.(that you can use only for savings and investments)
2. Think that 5OK is your take home salary..This you should use for misc, rent, and (also Savings)..
3. Many people in metros are getting 30k take home and doing all things which i mentioned in point2.
If you can’t do this, then what is the use of your educations & exposure..
Now Act accordingly
SAM
1. He is 28 – young. If he lives in Mumbai he can use the public transport. Both car and bike needs to go!
2. Household expense of 23,000 in Mumbai is OK. He needs to let go of branded expensive food items – like cocojal, fruit juices etc
Vishal Khandelwal
I think he doesn’t need any financial advice at this stage. At 28, and unmarried, all he needs is a nice spanking from his parents. That can bring his financial life in order. 🙂