Summary of this article
One can start investing anytime, but knowing how much to save and invest is a tough question. It requires consideration of various factors, including intentional lifestyle costs, assessing income and expenses, utilising excess funds for philanthropy among others
By Bhuvanaa Shreeram
When people ask, “How much should I invest?” they expect a number. Maybe, 20 per cent or maybe 30 per cent of their income. Some even expect a perfect formula based on their goals, inflation, and life stage.
But here is the honest answer: You should invest as much as you reasonably can–after you have provided for all intentional, meaningful spending.
Let us explain why.
The Earning-Spending Mismatch No One Talks About
For most working professionals, income is earned over 30-40 years. But spending, say, the need for money does not end there.
Life expectancy in India is rising. Many of us will live for 85-95 years. That means 40 years of earning, and possibly 50-60 years of spending (post-retirement included).
This makes wealth creation a race against time.
If you spend most of your income in your earning years and save just a little, the math simply does not work. Even saving 30 per cent of your income every year across 35 working years is not always enough to fund 30 years of retirement, especially with rising costs and unpredictable life events.
This is why we say: Save everything you reasonably can. But, the keyword is, reasonably.
What Does ‘Reasonably ’Mean?
Reasonable does not mean extreme frugality. It means pre-identifying the life you want to live, and then planning both your spending and saving around that.
1] Start by listing your desired expenses. Not just your equated monthly instalments (EMIs) and bills, but also holidays, gifts, dining out, hobbies, fitness, wellness, weekend getaways, etc. These are not luxuries. They define what “a good life” means to you.
2] Add them up. This is your intentional lifestyle cost. If your monthly income is Rs 2 lakh, and your intentional expenses are Rs 1.20 lakh, then your true surplus is Rs 80,000. That is your potential investment amount.
3] Automate your investing at the beginning of the month. Do not wait to see what is left at the end. What is left usually gets spent.
This approach makes wealth creation a conscious choice – not a leftover habit.
What If You Do Not Have Any Surplus?
Let us not ignore this reality. Many people go through years where there is no surplus at all. The reasons vary, such as family responsibilities, stagnant income, sudden medical expenses, or simply the rising cost of living. If this is your current situation, there is no shame in it. But there is also no time to wait.
You now have two responsibilities:
• Reduce lifestyle costs – not through guilt, but through clarity. Ask yourself: What can I change temporarily to protect my future?
• Increase income intentionally. Upskilling, side projects, switching roles, or just asking for what you are worth – these are not luxuries. They are financial survival strategies.
What If You Have More Than You Need?
On the other end of the spectrum, some people discover they are likely to accumulate far more than what is needed for their future. To them we say: Money comes with responsibility.
You now have the opportunity and the duty to do something meaningful with that privilege:
• Retire early or shift to more fulfilling work
• Create a legacy through philanthropy or intergenerational support
• Build community value - through mentoring, employment, or impact investing
Do not let surplus stagnate into hoarding. Let it flow where it can make lives better including yours.
How Much Should You Invest?
There is no universal formula, but there is a universal principle. Invest as much as you can, after clearly defining what you need to spend on.
Then spend on what you feel like spending. Not what social comparison pressures you into spending, but what you have thought through, budgeted for, and consciously chosen for. Everything else is surplus and that surplus is your ticket to future freedom.
The author is a certified financial planner and co-founder and head of financial planning, House of Alpha Investment Advisors
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
