Guide to save money in all-time life
You will find lots of rules of thumb but there is no universal truth to how much you should save. There are factors you DO need to consider though: you should start as early as possible to set money aside for retirement. You should then use a retirement calculator to at least get an understanding of the amount you need to set aside each month to achieve the desired retirement income; your default should be not to spend money and only spend money when you must. Leisure, travel and eating out should come last after you have saved up; you should have funds for different terms. For example, my wife and I have an emergency fund for unexpected expenses or losses in income. The rule of thumb here generally is to have 3-6 months of salary saved up. A longer term fund should be created for larger expenses like buying a car or preparing the cashdown on a property. Finally, the retirement fund which should cover your needs after you have retired.
"There are books like, ""The Millionaire Mind"" that could be of interest when it comes to basics like living below your means, investing what you save, etc. that while it is common sense, it is uncommonly done in the world.  Something to consider is how actively do you want your money management to be?  Is it something to spend hours on each week or a few hours a year tops?  You have lots of choices and decisions to make. I would suggest keeping part of your savings as an emergency fund just in case something happens.  As for another part, this is where you could invest in a few different options and see what happens. There would be a couple of different methods I could see for breaking into finance that I'd imagine: IT of a finance company - In this case you'd likely be working on customizations for what the bank, insurance or other kind of financial firm requires.  This could be somewhat boring as you are basically a part of the backbone that keeps the company going but not really able to take much of the glory when the company makes a lot of money. Brains of a hedge fund - In this case, you may have to know some trading algorithms and handle updating the code so that the trading activities can be done by a computer with lightning speed.  Harder to crack into since these would be the secretive people to find and join in a way." Gail Vaz-Oxlade has a budget calculator here that shows how much of your monthly net income should be allocated where. She recommends 35% for housing, 15% for transportation, 25% for life, 15% for debt repayment, and 10% for savings. Some people spend more then they make and her budget sheet helps get things under control for those people. For someone like yourself who seems to have things under control, this budget sheet can be a guideline for you. Play with the percentages if you like, and keep your spending under 100%. The amount of money you have should be enough for you to live a safe but somewhat restricted life if you never worked again - but it could set you up for just about any sort of financial goal (short of island buying) if you do just about any amount of work. The basic math for some financial rules of thumb to keep in mind: If your money is invested in very low-risk ways, such as a money market fund, you might earn, say, 3% in interest every year. That's $36k. But, if you withdraw that $36k every year, then every year you have the same principal amount invested. And a dollar tomorrow can't buy as much as a dollar today, because of inflation. If we assume for simplicity that inflation is 1% every year, then you need to contribute an additional $12k to your principal balance every year, just so that it has the same buying power next year. This leaves you with a net $24k of interest income that you can freely spend every year, for the rest of your life, without ever touching your principal balance. If your money is invested more broadly, including equity investments [stocks], you might earn, say, 7% every year. Some years you might lose money on your investments, and would need to draw down your principal balance to pay your bills. Some years you might do quite well - but would need to remain conservative and not withdraw your 'excess' earnings every year, because you will need that 'excess' to make up for the bad years. This would leave you with about $74k of income every year before inflation, and about $62k after inflation. But, you would be taking on more risk by doing this. If you work enough to pay your daily bills, and leave your investments alone to earn 7% on average annually, then in just 10 years your money would have doubled to ~ $2.4 Million dollars. This assumes that you never save another penny, and spend everything you make. It's a level of financial security that means you could retire at a drop of the hat. And if don't start working for 20 years [which you might need to do if you spend in excess of your means and your money dries up], then the same will not be true - starting work at 45 with no savings would put you at a much greater disadvantage for financial security. Every year that you work enough to pay your bills before 'retirement' could increase your nest egg by 7% [though again, there is risk here], but only if you do it now, while you have a nest egg to invest. Now in terms of what you should do with that money, you need to ask yourself: what are your financial goals? You should think about this long and hard (and renew that discussion with yourself periodically, as your goals will change over time). You say university isn't an option - but what other ways might you want to 'invest in yourself'? Would you want to go on 'sabbatical'-type learning trips? Take a trade or learn a skill? Start a business? Do you want to live in the same place for 30 years [and thus maybe you should lock-down your housing costs by buying a house] or do you want to travel around the world, never staying in the same place twice [in which case you will need to figure out how to live cheaply and flexibly, without signing unnecessary leases]. If you want to live in the middle of nowhere eating ramen noodles and watching tv, you could do that without lifting a finger ever again. But every other financial goal you might have should be factored into your budget and work plan. And because you do have such a large degree of financial security, you have a lot of options that could be very appealing - every low paying but desirable/hard-to-get job is open to you. You can pursue your interests, even if they barely pay minimum wage, and doing so may help you ease into your new life easier than simply retiring at such a young age [when most of your peers will be heavy into their careers]. So, that is my strongest piece of advice - work now, while you're young and have motivation, so that you can dial back later. This will be much easier than the other way around. As for where you should invest your money in, look on this site for investing questions, and ultimately with that amount of money - I suggest you hire a paid advisor, who works based on an hourly consultation fee, rather than a % management fee. They can give you much more directed advice than the internet (though you should learn it yourself as well, because that will give you the best piece of mind that you aren't being taken advantage of). You goal should be in rupees, as you are earning in rupees and spending in rupees. Any other currency is of no value / meaning.   More than being worried about the USD/INR rate, you should be worried about inflation and savings rate. This will change the amount that you need to save for your retirement. The USD/INR rate would anyways get reflected into some of the prices of some of the items and would get relfected into Inflation. Your savings goal should not be an arbitrary number. It should have a purpose. The purpose for saving goal could be to meet education in future, wedding, kids education, vacation, downpayment for house, retirement etc.  Say your goal is to save enough for you Masters degree that you plan to do after 3 years. Say As of today you find the cost fees/book/etc is Rs 100,000 for you Masters degree. Say Additional Rs 100,000 for your stay & food expenses. So essentially you need to save Rs 200,000 in next 3 years. However here is the catch, in 3 years time the inflation around 10% may mean you need to save Rs 200,000 * 1.1 = 220,000 at the end of first year, and 220,000 * 1.1 = 242000 for second year, and 242,000 * 1.1 = 266,200. So essentially you need to save more. If you run this in XLS it will be easy to track and moniter. Now at the end of 1st year whatever you have saved, you may keep it in short term fixed deposits, this would get you interest. So effectively this calculation will tell you how much you need to save monthly. For longer goals, you may say decide to invest the money in shares / PPF / or other instruments, the essential is same the returns that you are getting adds value and the inflation removes value. "The real question is what can you NOT do!  If you track all your monetary actions, you know everything about your monetary situation.  That means you have the tools to ask and answer ""what if"" questions, such as: ""If I get a 10% raise, could I take longer vacations?""  You could calculate how much you spend per day on vacation and then consider the amount of your raise and how much of it you'd need to allocate to vacations to, say, be able to take a two-week vacation instead of a one-week vacation. ""How much more would I have to earn to move to this nicer apartment?""  This may seem like a simple question, but a surprising number of people can't answer it in a reliable way, because they don't have a clear understanding of how much money they make and how much of it they can afford to spend on housing.  If you find you have lots of spare income, maybe you can move to the nicer place right away; if not, at least you can get a sense of how much more money you'd need to make it happen. ""If I started taking the bus to work, how much would I save?""  You can look at how much you spend on gas and compare that to the price of a bus pass.  By separating out categories like gas, repairs, and car insurance, you can also calculate different scenarios, like if you still kept your car but only used it for occasional trips, versus if you sold the car and used only public transportation. ""If I want to take a trip to Tahiti, what can I cut back on to save the money?""  Using your table you can pencil out scenarios like ""Suppose I stop eating out for lunch at work and just bring my lunch, how long would I have to do that to save enough to pay for a plane ticket?"" These are just a few random examples.  The general idea is that with a record of hard numbers, you can start to consider potential tradeoffs in an objective way --- that is, you can ask ""how much in category X would I have to give up to gain this thing I want in category Y?"" The real trick in making use of your data is not so much ""what"" you can do, but ""how"" exactly to do it.  You may have to become more of a spreadsheet wizard to really delve into these questions.  Also, if you have programming expertise, you can even use something like Python to do calculations that might be laborious in a spreadsheet." Set up budget categories.  Earmark your income as it is paid, for your budget categories.  Pay your bills and expenses.  For debts, pay the minimum on everything.  There will be an amount left once everything is budgeted.  That's the 'extra'.  Then focus on, in order of priority, the following: So, when your emergency fund is up to an appropriate level (3-6 months of living expenses as a rule of thumb, adjusted according to your comfort level).   Once you have your emergency fund started, budget at least enough toward your 401k to capture any matching offered by your employer. Then use the snowball plan to pay off your debts.  (From what your post says, this does not apply to you, but you may have some small credit card debts taht were not discussed).  Earmark the 'extra' for the smallest debt first.  When that debt is paid, the 'extra' grows by the minimum payment of the smallest.  Thus the snowball grows as you pay off debts. Once the debts are gone, reward yourself, within reason (and without going into debt). Now shift your extra into fully funding your retirement savings.  Consult a financial advisor to help you plan how to distribute your retirement savings across the available retirement savings types.  They can explain why it's good to have some of your retirement savings funded from after tax income.  They can help you find the balance between pre- and post-tax funded accounts.   Eventually, you may come to the point where you're putting the max allowed into your tax advantaged retirement accounts.  At your age, this is a significant achievement.  Anything left over after retirement savings is funded can be used for whatever you want.  If you choose wealth building, it can lead to financial independence. The first two should be a one time thing.  You can/should do more than one at a time.  The fourth one is optional, and should not be considered until 1 and 2 are completed, and 3 is maxed out. What you achieve is up to you.  Look up FIRE, or Financially independent, retire early.  There are groups of folks striving for this.  They share advice on frugal living and wealth building strategies.  The goal is to save enough capital to live off the passive income of interest and dividends.  Most of them seem to have pre-50 target ages.  At your age and income, you could hit a pre-40 goal.  But it takes commitment and a certain type of personality.  Not for me but it might be for you. "I've seen various blog posts (mostly from Penelope Trunk) refer to ""optimizers"" versus ""settlers.""  The optimizers are the go-getters, the ones always on the move, trying to optimize their time, their life, their experience, etc.  They tend to be younger, on average, live in bigger cities, and on the whole, tend to be less happy.  The settlers are the ones who settle for what is, live in smaller cities, and tend to be happier, albeit ""less interesting"". Assuming that your idea of ""slowing down"" refers to moving away from that maximizer lifestyle, yes, I think you'll probably save money.  Apparently it costs money to be unhappy!  Going out for meals everyday, going out with friends every evening, shopping for the latest and greatest whatever, buying the newest gizmo, trading up your car every 3 years, traveling every other weekend to far-off places, making your life ""interesting"" - these all cost, and far more than their opposites. Take time to be happy with what you have - enjoy your comfortable and broken-in shoes, enjoy your paid-off car, enjoy some quiet alone time with a good (library) book, appreciate the delicate tastes of a homecooked meal over the in-your-face greasebomb of restaurant food, take a walk, shut off the latest Apple iDevice, and just be.  You'll save money, find calm, and feel refreshed. *Apologies for waxing philosophical - though the connotations of ""slowing down"" sort of insist on it :)." "Remember where they said ""Life, liberty and the pursuit of happiness?  That is the essence of this problem.  You have freedom including freedom to mess up.  On the practical side, it's a matter of structuring your money so it's not available to you for impulse buying, and make it automatic.   Have you fully funded your key necessities?  You should have an 8-month emergency fund in reserve, in a different savings account.  Are you fully maxing out your 401K, 403B, Roth IRA and the like?  This single act is so powerful that you're crazy not to - every $1 you save will multiply to $10-100 in retirement.  I know a guy who tours the country in an RV with pop-outs and tows a Jeep.  He was career Air Force, so clearly not a millionaire; he saved. Money seems so trite to the young, but Seriously. THIS. Have auto-deposits into savings or an investment account. Carry a credit card you are reluctant to use for impulse buys.  Make your weekly ATM withdrawal for a fixed amount of cash, and spend only that.  When your $100 has to make it through Friday, you think twice about that impulse buy.  What about online purchases? Those are a nightmare to manage.  If you spend $40 online, reduce your ATM cash withdrawal by $40 the next week, is the best I can think of.  Keep in mind, many of these systems are designed to be hard to resist.  That's what 1-click ordering is about; they want you to not think about the bill.  That's what the ""discount codes"" are about; those are a fake artifice.  Actually they have marked up the regular price so they are only ""discounting"" to the fair price.  You gotta see the scam, unsubscribe and/or tune out.  They are preying on you.  Get angry about that!  Very good people to follow regularly are Suze Orman or Dave Ramsey, depending on your tastes.  As for the ontological... freedom is a hard problem.  Once food and shelter needs are met, then what?  How does a free person deny his own freedom to structure his activities for a loftier goal?  Sadly, most people pitching solutions are scammers - churches, gurus, etc. - after your money or your mind. So anyone who is making an effort to get seen by you and promise to help you is probably not a good guy.  Though, Napoleon Hill managed to pry some remarkable knowledge from Andrew Carnegie in his book ""Think and Grow Rich"". Tony Robbins is brilliant, but he lets his staff sell expensive seminars and kit, which make him look like just another shyster.  Don't buy that stuff, you don't need it and he doesn't need you to buy it." In general, the better advice I've heard is to spend only on things that matter to you and scrimp on the rest. It's an easy way to budget without having to stick to a strict set of rules. Otherwise keep 3-6 months of living expenses in liquid accounts (money market, savings) and invest the rest. "My father imparted this advice to me when I was a teenager, and it hasn't failed me yet. > Pay yourself first What this means is that the first ""bill"" you pay should always be your savings. Preferably in a way that automatically comes out of your paycheck or account without requiring you to take an active step to make it happen.  I save a ton of money, but I am no more disciplined than anyone else. I just realized that over the years of progressing in my career that I gradually got higher and higher salaries, yet never had a substantial increase in the money I had leftover in my bank at the end of the month despite the fact that I make about 8x the money I used to live reasonably comfortably on. Therein is the point, we spend whatever money we see, so you almost have to hide it from yourself. First, participate to the fullest in your company's 401k if they offer it. After a while you will adjust naturally to the net take home pay and won't miss the savings you are accumulating. Absent that, or in addition to that, set up a separate bank or investment account and arrange an automatic transfer from your checking account every month. Then set up automatic investing in CD's or some other less-liquid-than-cash investment so you it is just enough hassle to get at the money that you won't do it on a whim. It sounds too simple, but it works." "In the end, this is really not a finance question. It's about changing one's habits. (One step removed, however, since you are helping a friend and not seeking advice for yourself).  I've learned a simple cause & effect question - Does someone who wants (goal here) do (this current bad habit)? For example, someone with weight to lose is about to grab the chips to sit and watch TV. They should quickly ask themselves ""Does a healthy, energetic person sit in front of the TV eating chips?""  The friend needs to make a connection between the expense he'd like to save up for and his current actions. There's a conscious decision in making the takeout purchase, he'd rather spend the money on that meal than to save .5% (or whatever percent) of the trip's cost.   If he is clueless in the kitchen, that opens another discussion, one in which I'd remark that on the short list of things parents should teach their kids, cooking is up there. My wife is clueless in the kitchen, I taught our daughter how to be comfortable enough to make her own meals when she wants or when she's off on her own. If this is truly your friend's issue, you might need to be a cooking spirit guide to be successful." "@pyb is right - you should put an hourly dollar value on your time.  Calculate a realistic number and keep it in the back of your mind. Then when you're looking for a discount or a saving, estimate the maximum amount that you'd be able to save.  This should be a realistic proportion of the value of the item.  From those figures you can get the maximum amount of time that you should spend on looking for that discount. Spend any more than that amount of time and you lose money even if you get the discount.  So then you can end up with a few rules-of-thumb like ""don't spend more than x minutes of time per dollar of possible savings"".  Then you can spend the spare time you've created on looking for savings on big-ticket items where the time is more efficiently used... or on studying to upgrade your earning potential... or on taking some time out to enjoy the world and sniff the flowers. :)" The core idea behind this statement is that there is always money for what you prioritize. If you try to use whatever is left over after your bills for savings, you probably won't save very much if anything. In practice, you decide on a fixed amount of money you will save out of each paycheck and put that aside in an investment or savings account, then pay your bills out of what is left.  Essentially it is a way to counteract the tendency of your lifestyle rising to exactly meet your income and leaving nothing for savings. Well, actually in your brother's case it's quite a good idea. Not as a savings method, but as what it is - insurance. As long as he's alive and well he can pay his own debts, they're his problem and it's his responsibility. Once something, god forbid, happens to him - the debts become the problem of his survivors (you, if he doesn't have kids, for example). His life insurance should provide the means to pay off the inherited debts. So the point of life insurance as insurance is to make sure those who survive you have enough of what they need to continue living as they were with you. Some policies take into account injuries and work disability, so that not only when you die there are benefits, but also when you had an accident and can no longer work. Some policies are basically a combination of savings and insurance - that's the policies discussed in the investing threads. edit as clarified in the comments, debts cannot be inherited per se, they will be paid off from the estate before disbursement of such. What it means though is, if the deceased had accrued significant debt, all his assets may go to the creditors leaving survivors with nothing, which may also mean homeless. That was the kind of a problem I was talking about. I am sorry for your loss, this person blessed you greatly.   For now I would put it in a savings account.  I'd use a high yield account like EverBank or Personal Savings from Amex.  There are others it is pretty easy to do your own research.  Expect to earn around 2200 if you keep it there a year.   As you grieve, I'd ask myself what this person would want me to do with the money.  I'd arrive at a plan that involved me investing some, giving some, and spending some.  I have a feeling, knowing that you have done pretty well for yourself financially, that this person would want you to spend some money on yourself.  It is important to honor their memory. Giving is an important part of building wealth, and so is investing.  Perhaps you can give/purchase a bench or part of a walkway at one of your favorite locations like a zoo.  This will help you remember this person fondly.  For the investing part, I would recommend contacting a company like Fidelity or Vanguard.  The can guide you into mutual funds that suit your needs and will help you understand the workings of them.  As far as Fidelity, they will tend to guide you toward their company funds, but they are no load.  Once you learn how to use the website, it is pretty easy to pick your own funds.   And always, you can come back here with more questions.