HomeBlogPersonal Finance MnagaementThe 50-30-20 Rule – Invest this much Every Month From Your Salaries

The 50-30-20 Rule – Invest this much Every Month From Your Salaries

How Much Money You Should Invest From Your Salary Every Month

So, you’ve decided to invest some of your monthly earnings. But, do you have a strategy for how to approach it? Investing money online and earning monthly from it requires thorough research and perseverance. This article has been created to assist first-time investors who intend to set aside a portion of their month’s income for investment opportunities.

It makes no difference how much money is invested. It all boils down to your willingness to make sacrifices to reach your financial objectives. Unfortunately, most people spend money on things they don’t really need as soon as they get their salary, instead of thinking of investing.

If you try to calculate how much you spend on these things, you will be able to determine the expenditure that you can eliminate to increase your savings and utilise them to invest later.

For instance, your monthly salary is roughly Rs. 15,000. Maintaining daily expenses can be challenging. But if you can set aside even Rs. 500 each month. Then, at the end of the year, you will be left with Rs. 6000 in savings.

With this extra cash, you can start investing in businesses, your P2P Portfolio, or even stocks. And here is some guidance on how to invest your monthly salary.

How to invest your salary every month

Set Up Your Investment Goals

We all have multiple responsibilities in life, such as raising a family, paying for the kids’ education, and saving up for retirement when the time comes. Planning for it can be tricky, especially for middle-class Indians.

But don’t let this anxiety prevent you from attaining your financial objectives. On the contrary, it is best to be aware of potential difficulties in the future. To improve your prospects of future financial stability, identify your investment goals as early as possible.

Determine how much money you should put into each investment instrument and its potential returns. Then, plan your future earnings accordingly, to accumulate the funds needed for your investment plans.

Make a Strategic Investment Plan.

Many people make the same mistake with their expense planning. They spend on their wants as their salary gets credited. You cannot avoid spending on basic needs such as food and monthly expenses. But, you can surely curtail your spending on your wants, at least until you have set aside some money for your investments.

Make saving for your investment a priority expense, if you want to build your wealth from your salary money. You can budget your expenses according to the 50-30-20 rule. According to this rule, 50% of your salary or your total monthly income is spent on your needs. You should limit your expenses to 30% and 20% of your income must go to your investments and savings. This investment strategy may allow you to accomplish your objectives more quickly and safely. The 50-30-20 rule is a popular phrase while talking about strategic investment plans.

As soon as you receive your salary every month, you can put a part of your money into your investment account. Owing to this action, you’ll be able to control your monthly spending better.

Understand Risks When You Invest.

By establishing your financial objectives and plans, you have covered a significant part of building your investment strategy. Now that you see the broader picture, you can determine which risks are manageable and which are not.

A vital phrase that frequently appears when you research and analyze investments is the “risk appetite”. The term means the maximum risk an investor is ready to face in the pursuit of their financial goals before benefits get outweighed by the risk. In simple words, if you are willing to invest in high-risk investments with a higher chance of loss, with an aim for higher returns, you have a high risk appetite. The loss you can take as part of your investment plan determines your risk appetite. Having a thorough understanding of this can help you be ready for worst-case events and help you prepare your backup plan. Always remember that “risk is inevitable!”

Know Your Investment Options

After determining your investment capacity, the following step is to decide where to put your money. The market is flooded with investment options that are suitable for both beginners and experienced investors. If your risk appetite is low, you can choose safe bets such as fixed deposits or government bonds. If you are ready for a slightly higher risk, you can go for mutual funds. If you have a high risk appetite, you can invest in equities.

Get Help From Financial Advisers.

It is advisable to seek help from financial consultants who can direct you in the proper direction if you want an expert opinion on how to invest your salary effectively. For example, they might suggest saving a percentage of your monthly income.

Generally, it’s a good idea to save 20%  of your salary.

For instance, let’s say your monthly salary is Rs.20,000. You will have Rs 48,000 at the end of the year if you save 20% of your salary every month. Then, you can start your investment journey using the money you have saved.

Additionally, as your salary grows every year, your investment fund savings grow too. And consider the amount of money you will have saved in ten years, using this method.

When it comes to utilizing money properly through investments, it is never too late to start investing; age is irrelevant.

Above all, keep your attention on market trends to keep yourself informed. By making disciplined investments, you will be prepared to support your family when they need it.

Remember to Set Aside Some Money for Emergencies.

One important action you can take to protect yourself is to create emergency funds. A cash reserve especially set aside for unforeseen costs or financial emergencies is known as an emergency fund. A few typical examples of such unforeseen costs are car repairs, home repairs, medical expenses, or lost wages.

Setting up an emergency fund is also one of the first things you can do while beginning to save. By setting aside some money for your emergency fund and then planning your investments, your investment strategy won’t be affected much when an emergency hits you. Otherwise, the money you planned to put in a particular investment will have to be spent on the emergency and your investment plan goes off track. The emergency fund helps you recover quickly and get back on track to pursue your investment journey.

Simply put, you can utilise your emergency funds to pay large or small unanticipated debts or payments that are not part of your regular monthly expenses and investments.

Conclusion

Although investing, saving, and budgeting may seem like complex ideas, they are not. They are keywords to remember in your endeavor of securing your future. Enjoy your life! But don’t forget to set aside money from your salary in an account for savings. Even though it’s been said that life is brief and that worrying about the future is unwise, it’s always a good idea to be prepared for everything.


LenDenClub is India’s largest alternate investment platform which started operations in India in 2015. We have been helping investors diversify their investments beyond traditional investment instruments ever since.

About

Investment

The Reserve Bank of India does not accept any responsibility for the correctness of any of the statements or representations made or opinions expressed by Innofin Solutions Private Limited, and does not provide any assurance for repayment of the loans lent through its platform.

LenDenClub is an Intermediary under the provisions of the Information Technology Act, 2000 and virtually connects lenders and borrowers through its electronic platform via the website and/or mobile app.

The lending transaction is purely between lenders and borrowers at their own discretion, and LenDenClub does not assure loan fulfilment and/or investment returns. Also, the information provided on the platform is verified or checked on the best efforts basis without guaranteeing any accuracy of the data/information verification. Any investment decision taken by a lender on the basis of this information is at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower, fully or partially. The risk is entirely on the lender. LenDenClub will not be responsible for the full or partial loss of the principal and/or interest of lenders’ investment amounts.

 

*P2P investment is subject to risks. And investment decisions taken by a lender on the basis of this information are at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower.

** Average value mentioned is the weighted average of returns received by investors

© 2023 LenDenClub by Innofin Solutions Private Limited | CIN: U74999MH2015PTC266499

Watch our latest commercial with Hardik. Now you can also #InvestLikeHardik