How to determine the right percentage of your salary to invest each month

Many young earners ask themselves, “What percentage of my salary should I invest monthly? Would 10% suffice, or should it be 20%?” They typically seek a quick and easy way to determine if they’re on the right path and to alleviate any guilt associated with their spending habits. Regrettably, this is one of several flawed inquiries people make regarding personal finance.You must ask, “How much should I invest for my financial independence?”. The answer won’t be pleasant! Here is a thumb rule. Invest as much as you spend each month for normal retirement. For early retirement in India (FIRE),  invest nearly twice as much as you spend each month.The screenshot below illustrates the origin of this rule. We recommend using a proper retirement planning tool and repeating the calculation once a year with fresh inputs. Here is a detailed calculation: I am 30 and wish to retire by 50; how should I plan my investments?Screenshot of retirement calculator as a function of monthly expensesIn summary, do not ask, “What percentage of my salary should I invest each month?”. Instead, ask, “What percentage of my expenses should I invest each month for financial independence?”. The answer is bitter medicine – as much as possible, ideally as much as you spend! For another illustration, see: How should I invest to get Rs. one lakh a month pension?Do share this article with your friends using the buttons below. 🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users! Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this! 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Search among our 2000+ articles for information and insight!About The Author Dr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice. Our flagship course! 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So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision-making and money management is the narrative. What readers say!Feedback from a young reader after reading Chinchu gets a Superpower!Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun. Buy the book: Chinchu gets a superpower for your child! How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only! Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool! 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Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained) Connect with us on social media Our publicationsYou Can Be Rich Too with Goal-Based Investing Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. 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