Investment Guide: How Much of Your Monthly Salary Should You Put in SIPs?

You get your salary at the start of the month. Rent, household expenses, school fees, and EMIs eat up most of it. You might wonder how much money you should actually save for the future after clearing all these bills.

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SIP

You receive your salary on the first day of the month. Rent, groceries, school fees, and EMIs quickly drain your bank account. You need to figure out a safe amount to invest in mutual fund SIPs after managing all these regular expenses.

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You can split this 20 percent between SIPs, emergency funds, and loan repayments

A Systematic Investment Plan (SIP) lets you put a fixed amount into mutual funds every month. You get the benefit of compounding over the long term. You should decide your SIP amount based on your income, expenses, loans, and emergency funds. The popular 50-30-20 rule suggests keeping 50 percent of your income for needs, 30 percent for wants, and 20 percent for savings and investments. You can split this 20 percent between SIPs, emergency funds, and loan repayments.

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Here's how to set aside your money

You can set aside Rs 8,000 (20 percent) for savings if you earn Rs 40,000 a month. You can put Rs 2,000 in an SIP and Rs 6,000 in an emergency fund for a low-risk approach. You can split it equally with Rs 4,000 in an SIP and Rs 4,000 in an emergency fund for a balanced plan. You can even invest Rs 6,000 in an SIP and keep Rs 2,000 for emergencies if you want to invest more aggressively.

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And more...

You get Rs 12,000 as your 20 percent savings pool if your monthly salary is Rs 60,000. You can allocate Rs 4,000 for an SIP, Rs 4,000 for an emergency fund, and Rs 4,000 for loan repayment in a balanced plan. You can easily increase your SIP amount if you have no pending loans and already maintain a solid emergency fund.

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You can always change this ratio based on your personal expenses and financial liabilities

You can save at least Rs 20,000 (20 percent) if you make Rs 1 lakh a month. You can direct Rs 10,000 into an SIP, Rs 5,000 into an emergency fund, and Rs 5,000 towards debt repayment for an investment-focused plan. You can always change this ratio based on your personal expenses and financial liabilities.

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If your SIP Salary is low...

You do not need a massive amount to start an SIP if your salary is low. You can begin with just 10 to 15 percent of your income. You can step up your SIP amount gradually as your salary increases. Experts say regular investments and timely step-ups build long-term wealth. You must build an emergency fund and clear high-interest loans before committing to large SIPs.