Q: How much do I save according to my age? That is at a time when I have a limited responsibilities, I am possibly married or just single earning on my own. Second, when I have responsibilities and I am spending on old parents, children etc. Third, when I am approaching retirement or I am paying for children's higher education?
A: All the three scenarios are absolutely situation specific, so there is no generalistic answer. However, income moves up, expenses does not normally move up in a linear fashion. So if your income is moving up 10 percent, it is not necessary that your expenses are also moving up 10 percent. What that means in simpler words is if you are going to start at 20 percent when you are young, early 30s something like that, as your life moves along you should try and increase that 20 to 22 percent, 25 percent, maybe 30 percent.
When you are somewhere in midlife around 40s your income is obviously at a pretty reasonably good level and at that point of time you can be spending about 40-50 percent of your money for your expenses which means there is about 50-60 percent available to save.
What happens is when you are moving towards retirement again you want to consolidate, so you want to make sure you have annuities and flows coming to you. So you want to do a little bit of asset allocation strategies there rather than thinking of how much money you want to shell away. Often it happens in real life experiences that when people are closer to retirement they get larger bonuses, their payouts are larger, but their expenses have not dramatically changed. So therefore sometimes income saving potential becomes as high as even 60 and 70 percent. So somebody having a Rs 5 lakh income and reasonable expenses, more unnecessary burden of EMIs on extra homes, so to say I have seen those people can even save about Rs 3.5 lakh every month, because how much can you possibly spend if you have a decent lifestyle, otherwise there is no end to how much you can spend. These are just three broad guidelines if you want to use, because situations will dictate what you should do exactly for each segment.