1. What is your actual income?
Your real income, or take-home salary, is what you actually pocket each month, and not your CTC because a part of this, like variable pay, bonus and dividends, may not be available at times.
2. What are your expenses?
Make 2 lists of your expenses – mandatory and discretionary – for last 6 months or entire year, by cross checking them from your bank, ATM withdrawals and credit card expenses,
and work out your average monthly outgo.
3. What’s the difference?
If monthly expenses are less than your take-home pay, you should increase your savings and investments, but if they are more then you’re obviously living beyond your means.
4. What are your goals?
Write down all your financial goals, including loan repayment, with their timeframe, and build in additional inflation cost of 6-8% to arrive at their real amounts.
5. What are your savings and investments?
List each of them and utilize a “final worth of investment” calculator to know how much each will grow after a desired time period.
6. How to fulfill your goals?
a) Utilize a “savings target” calculator for computing investment needed every month to achieve your medium-term and long-term goals within the required time period.
b) Then compute what can be funded through your current savings and investments.
c) The deficit will tell you how much more you need to save and invest.
d) If you don’t have investible surplus, generate it by reducing your discretionary expenses.
e) If you do have an investible surplus, invest it as per your risk profile.
Your real income, or take-home salary, is what you actually pocket each month, and not your CTC because a part of this, like variable pay, bonus and dividends, may not be available at times.
2. What are your expenses?
Make 2 lists of your expenses – mandatory and discretionary – for last 6 months or entire year, by cross checking them from your bank, ATM withdrawals and credit card expenses,
and work out your average monthly outgo.
3. What’s the difference?
If monthly expenses are less than your take-home pay, you should increase your savings and investments, but if they are more then you’re obviously living beyond your means.
4. What are your goals?
Write down all your financial goals, including loan repayment, with their timeframe, and build in additional inflation cost of 6-8% to arrive at their real amounts.
5. What are your savings and investments?
List each of them and utilize a “final worth of investment” calculator to know how much each will grow after a desired time period.
6. How to fulfill your goals?
a) Utilize a “savings target” calculator for computing investment needed every month to achieve your medium-term and long-term goals within the required time period.
b) Then compute what can be funded through your current savings and investments.
c) The deficit will tell you how much more you need to save and invest.
d) If you don’t have investible surplus, generate it by reducing your discretionary expenses.
e) If you do have an investible surplus, invest it as per your risk profile.