The Second Most Important Decision every investor should take

Amar Pandit , CFA , CFP

I am delighted to see the amazing response to my previous blog on “Time Creates Money” and more than that humbled by the commitment of readers to take massive action by starting NOW. This brings me to the next key decision and action one must take. Most of you must have guessed it by now that the second decision and action is “How much do I Save?”. In Short “Saving”.

Saving is the bedrock of Wealth Creation and a key ingredient(fuel) that lets time create Free Money for you. Some people think that I will Save when I earn more money or that I don’t earn enough. However the reality is completely different. Saving is actually a Mindset and if you cannot save when you are earning Rs. 10000, then chances are you won’t be able to save when you are earning even Rs. 10 Lakh per month. I have seen many corporate executives earning a package of Rs.2 Crore per year and yet unable to save. There is always this fancy house to buy(working for your beloved bank and paying EMIs diligently) and many other lifestyle expenses. I am not saying that you should not live well or fund a lifestyle but before you do that the key point is “How much should you save?”.

The answer is atleast a minimum of 25% of your take home. Additionally if you factor in some of the tax saving investments under Section 80C or so that you do , this can be higher as well but at a bare minimum including your tax saving investment , this should be atleast 25% of your take home.

Even if you are unable to save 25% of your net income , START with 10%  . Any person regardless of income can start with atleast 5-10% of their take home as saving. It’s a must because like I mentioned above if you cannot do this now , you will never be able to do it and more importantly you will leave FREE MONEY on the table (by not allowing time to create money for you) . I have seen people earning Rs.20000 per month with children saving Rs. 3000-4000 a month . The thing that they have done well is JUST Starting a Savings Program.