Can you save 10% of your salary every month?

POSTED BY Jagoinvestor ON June 29, 2009 COMMENTS (61)

Answer this question Honestly. Don’t rush, think about it and then answer this very important question. If you get salary cut of 10% and you have to live with 90% of your salary; how will it affect you? In this article we will see some important insights on spending habit and psychological issues.

Most of the people do not save anything at the end of the month and the biggest reason is that they are not left with anything (as they say). “Supply creates its own demand”.

save money

This applies to Personal spending also. When we have money in our hand we will come up with million reasons as to why we have expenses and why we can’t do with any money less than that.

Answer these questions:

If you get a salary cut by 10%, will you be able to

– Pay your Rent
– Meet all the household expenses
– Pay your children fees
– Spend on all the important things like Entertainment, eating out, occasional
splurging etc etc….

I can bet that most of you will have answer in YES!!

If people control and prioritize their spending then it’s totally possible to live in 90% of salary. Just close your eyes and imagine a situation that you are now earning just 90% of your regular salary. Small savings can make up large chunk of investments.

If you try to answer the above questions then the answer would be a YES for almost all of you. There can be some exceptions but i am talking about majority.

For some people they may require cutting down on totally useless stuff and reducing expenses on things which can/should be avoided. Some of the examples are

  • If you see go out 5-6 times a month, reduce it to 3-4
  • If you see 5 movies a month, reduce it to 4
  • Anything where you can do with less spending

Does saving 10% means that you start living a Frugal life?

Please understand that saving money does not mean depriving yourself. The only thing I’m saying is that we Indians especially in Metro cities have slowly started going the American Way, i.e. Spending more than what we earn. From last couple of years, we are using to much of credit cards in the way we shouldn’t be!

We are a nation which saves but do not invest properly and now we Indians have started spending like never before. Spending is good, spending on useless stuff or stuff we can do without can be like cancer. It will not hurt you immediately, but kill you some day.

Now after you have realized that we can really live with 90% of our salary, what can we do with it. SAVE IT!! what else?

I believe (and I can prove) that saving 10% of your salary is only what you need to do to achieve all your goals in Future, provided you Start Early and Have realistic goals.

A person who is 25 yrs old and earning 40,000 per month if saves 10% will his retirement(60 yrs) would be having anywhere from 2.3 crores to 6 crores if he earns anywhere from 12%-16% in long term which is totally acceptable. See how to calculate this in this video.

What to do?

Next time you get your salary, take 10% out of it and deposit it in some other bank account. Just try to see if you can do with 90% of your salary. I bet you can do it. Saving 10% of your salary can have drastic effect on your investments. You can create nice wealth using Equity in long term.

One of the readers Ramjee comment is worth notice. Please see his comment.

That was on the bulls eye. A little bit of decrease will not effect lifestyle much, but has a lasting impact on your wealth. I have an automated schedule put to transfer 15% of my salary (a fixed amount every month, which is revised if sal.changes) to another account. At end of 6 months it feels good to see the lump sum which can go in for further investments. “

What he did is worth appreciation. I hope people learn from him.


We don’t save because we think we can’t save. Whereas if you try its totally possible. Just to try do this next month. When you get your salary, take 10% out of it and deposit it in some other account and try to live with 90% of your salary, see what all your are missing and if you are facing some difficulty or not.

To see more tips on savings and spending, you can refer to Ramit Sethi’s blog.

61 replies on this article “Can you save 10% of your salary every month?”

  1. astrosunil says:

    Thanks for this wonderful article Manish. the first thought that came to my mind is when u can adjust with 90%, you can push harder & manage at 80%.
    I would like to add a couple of points here :
    There is a thumb rule suggested by many financial experts. One can maintain 3 accounts – Salary account, Expenditure account, & Investment account. As salary is a zero balance account usually, transfer the money from that to other 2 accounts immediately after salary is credited. You can limit your expenditures by carrying around the ATM card for shopping of the expenditure account alone. One can invest the amount in the investment account in various instruments. Give this account number for ECS for various investments. Do this for an year & see the difference it makes in your financial life. relook & revise the limits once a year or so. Go online & maintain religiously. well one needs to spend & enjoy life too, so just sent the limits accordingly.

    This all should be done after having a emergency/contingency fund say of about 6 months of normal living costs.

    People tend to belive after switching a job or so that he or she is earning more now so don’t have to manage my money so carefully as before. This is so wrong. whatever you earn, you are subject to inflation, tax, emergencies etc. So one should not snooze & be alert all the time in the finiancial matters.

    The above ideas as inspired from the Smart Money show by Finiancial Planner Monika Halan.

    1. Great .. thanks for sharing these ideas with everyone πŸ™‚

  2. pyarelal says:

    My situation is partially similar to flubber the difference is now am 41 and when i worked abroad i was single, able to save exactly 100X of current gross salary, when i arrived in india realestate was just about to move up (around 2003) so i was able to invest significant portion in RE. later on started investing in equities (both shares & MF) also i don’ t have any loans owning a independent house with in city limits in a major city.
    I am also able to save around 80% of my gross salary spending only 20% and able to invest good portion of it in MF-SIP’s.
    What you have mentioned about NRI’s is true regarding their investment when working abroad even i also did same mistake of investing (is it saving?) in FD’s like others.

    1. The final point is , do you have enough to justify your savings and current worth . It is ok if you invested in FD ,nothing wrong in that !

  3. flubber says:

    Am I spending less –
    I’m 35 yr old with one toddler child and wife. Wife has decided not to work and thoroughly enjoying her motherhood. I have saved which is 95X of my present gross monthly salary (we saved as a DINK NRI couple for last 6 yrs or so). The almost whole money is lying in FDs and yielding an average return (7.5-9.25% before tax).
    About my expenditure – At present, I can sustaining my family in approx. 30% of my take home monthly salary and can save 65% (again goes to FDs). I am living below my mean with estimated monthly expense of 37000 Rs (As I keep track by on-line Quicken-like tools), My expenses are considerably less than my peers, they spend on an average Rs 80-100k/month. However, I am happy with my present lifestyle and expenses. I have purchased Car, invested in home and bought other stuffs all out of my pocket, so I have no loans on my shoulders. I used credit card only for gasoline purchase, paying utility bills and groceries.
    My questions are
    1. Am I making mistake by choosing middle income life-style and not spending more, which I can do easily?
    2. Am I going somewhere wrong by not investing in more riskier investment tools as I have only 5X of my monthly salary in equity linked investment tool?

    1. Muthu Krishnan V says:

      My take on this.
      1. awesome! Thats the way to go. Live with what you need and not with what you can.
      2.Yes, 95% in debt and 5% in equity looks bad. should be around 40:60 or 30:70.

      1. Flubber says:

        @ Mr Krishnan – Thank you for your insight. It is interesting I have noticed many of us who have stayed considerable time in west and now relocated to India, have very conservative spending habit and ultra conservative investment style.

      2. @flubber

        1. Thats really amazing , Your peers will envy you later, take it from me !.All I would say is , if you need some thing in life, go for it , dont compromise so much that saving all the money becomes a pain in your life .

        2. Yes definately , its opportunity cost ! . If you have Rs X today with you , You could have had 1.5X or 2X if you had taken care of how well it should be invested , so its an area of improvement for you !


  4. Ankit says:

    HI Manish,

    Thanks for this useful guidance, but I have already started saving into other account from 3 months(and still continuing) before reading this article :), because I also had a bad time when all my money goes in one shot and every month I remain empty handed.

    still worth to read this article :), Great JOB dear!!

    1. Ankit

      Great to hear that ! . Keep going like this !


  5. Rajdaphale says:

    Hats Off!!! Manish…. for a Such a Eye-Opener Article.

    Thanks alot buddy.

    1. Rajdaphale

      Nice to know that you liked the article , What are your plans to follow the advice ?


  6. kaushal says:

    every drop of water & every grain of sand makes the mighty ocean & the mighty land . thanx Manish for reminding your readers about the old quote . keep it up .

  7. Ajay says:

    Here is another step one can add after you put aside the 10% at the begining of the month. Just transfer the amount that you have at the month end out of your salary account, no matter however small the amount and try to increase this amount next month. I am sure after reading Manish’s articles you will certainly left with some amount in your accounts πŸ™‚

    1. Ajay ‘

      Nice point . As salary increases the savings should also increase .


  8. dhruv singh says:

    hi manish,
    i have already subscribed to your RSS and invest regularly in LIC Ulip . I know i have made one mistake by investing in ULIP instead of not investing in SIP. but whatever has happened, has happened and cannot be changed . i am investing around 60000 in this policy per annum and two years have completed (for 20 years, invetment for 5 years). i am also investing in shares but not regularly its like as soon as i find the shares are falling i buy some and as soon as some shares rise i sell them keeping a interest rate of around 7-8 percent on these shares . but i want to know how can i do better investing . i am 24 and want to make lots of money when retire . but i also want to know about futures and options . i know they are really risky but the thing which is luring me is the amount of return they give πŸ™‚ wanna know how to learn more about the same .

    1. Dhruv

      You can learn about options and futures from many ebooks on the net. Also you can read about them on net , just search about it . NCFM module material is also available on net . I would like to warn you on F&O , you might hear 1000% return and money doubling in a day , but all I can say is control your self and dont try to much of it . I have been through that phase . Start small . Grow gradually .


  9. murali says:

    I cant be rich by saving…I cant save more than my paycheck. Have to MAKE more money

    1. Murali

      Yea may be . Some people situation does not allow that , so you should look at increasing income .


  10. khushboo says:

    Hi Manish..
    My name is Khushboo. I am a Management student and planning to take majors in finance. I am very Good with numbers but a little weak in current knowledge of Finance, I really like your Blog.its Really helpful.
    But is their anything specific that you would like to suggest to enhance My knowledge of Finance…

    1. Khusboo

      What do you mean by you are good at numbers ? No certification like CFP or CFA would require that much of love for numbers, but you can do a lot by researching and using statistical methods in financial products .


  11. Pingback: 9 effective tips for spreading financial literacy in your child
  12. gopal says:

    Great article Manish. Truth is Bitter :))

    1. Gopal

      Thanks πŸ™‚

  13. Azad says:

    Haan bhaijaan…
    Nice guess!
    Pilot hi hoon… Recession me buri tarah se fasa hua hoon..!!

    Lets hope for d best..!
    .-= Azad´s last blog ..25 years of poison… Bhopal =-.

  14. Azad says:

    Hey man!
    i m living on a 85% pay cut since last 18 months (and no, it is not a typing error…)!
    eeerrrgghhh…. recession!
    any magic tricks for me!
    .-= Azad´s last blog ..25 years of poison… Bhopal =-.

    1. manish says:

      oops .. 85% salary cut is a tough thing .. were you a pilot or what ? what job are you in ?///////


  15. mkngtrbl says:

    I am planning on returning back to India for work after being for 9 years in US. I am an avid reader of financial planning related websites here and was looking for something good that is more India centric. I like you articles and they resonate well with me. I am going to spend a fair bit of time going over the past articles now. Glad I stumbled into this site.
    Thank you.

    1. manish says:

      Sure , you should go through section πŸ™‚


  16. Manish Chauhan says:


    Great …

    Thanks for your involvement πŸ™‚


  17. Madhab says:

    "Spending on useless stuff or stuff we can do without can be like cancer . It will not hurt you immediately , but kill you some day ." ,

    Very Well Said Manish..
    And a nice article.. trivial yet powerful..

    I am going to forward this article to all my friends..
    Keep up the Good work..


  18. Manish Chauhan says:


    What do you think is the accepted rate of return from Equity over long term .. My assumption of 16% is because

    – Historical performance (17% +)
    – Assuming an annual review of investments and deletion and addition of Stocks or Mutual funds whatever invest in .


    1. Rajesh D says:

      Hi All,

      Mutual Funds like HDFC Top 200 have given 25 % Compounded Return since last 14 years. And 18 % per ann in last 3 years of turmoil.

      So put in only the 5 star rated once. I personally loook up to for the 5 star diversified funds only.

      Hope you find this useful. Happy Saving AND Investing πŸ™‚


      1. Rajesh

        Yup , 5 star funds are mostly good . The additional checks which should be done is the suitability for youself .


  19. Anonymous says:

    I accept with your overall concept.

    Only concern is with the return percent of 16% overall that too over 35 years.

    Rest i do agree with your savings concept and power of compounding

  20. S S Cheema says:

    Hi manish – a nice article and I want to leave a link to this article in my blog – will wait for your reply before I do it.
    My blog is

  21. pradeep says:

    Hey Manish

    Thanks for posting it. will give a try.


  22. Tanmaya says:

    Really Thax… Good post

  23. Manish Chauhan says:


    Its fine , if the cost of being disciplined is 1 yr , then everyone should pay the price πŸ™‚


  24. Ramjee says:

    Thanks Manish for putting my earlier comments on the post. It needs a lot of discipline not to take money out of the said account. It took me about an year to get into this habit.

  25. Manish Chauhan says:

    @nids .. Nice to have you here at jagoinvestor ..

    Thanks for the comment . Keep visiting .


  26. nids says:

    Awesome!!!! You have put up your thoughts very cleanly and with good justification.

  27. Manish Chauhan says:


    I would recommend going for SIP at this point , as its a nice time for equity markets for long term . Just make sure that you also take out money from your RD's as either pay of any loans if you have or utilize it in some other better paying thing like Liquid funds or PPF etc .


  28. Zindagi says:

    Well thats a great idea too, was planning to do that from this month.

    Neways just wanted to thank you for such nice posts.

    Great work

  29. Manish Chauhan says:


    Great !!

    I would recommend starting a SIP rather than RD incase you dont need money in short term .

    What do you think ?


  30. Zindagi says:

    Very nice and useful post.

    I have been doing something like that since last 2 year.

    I opened a Flexi RD account for 1 year in bank, i transfer nearly 10% of my salary to this account, The RD installments being flexible, i can choose to deposit more or less as per my requirements.

  31. Manish Chauhan says:


    Thats incredible πŸ™‚ . You are the hero of this thread . I am adding your comment on the article itself .

    I am sure this kind of action will significantly affect savings of individuals . Nice job . Hope people learn from you .


  32. Ramjee says:

    That was on the bulls eye. A little bit of decrease will not effect lifestyle much, but has a lasting impact on your wealth. I have an automated schedule put to transfer 15% of my salary (a fixed amount every month,which is revised if sal.changes) to another account. at end of 6months it feels good to see the lump sum which can go in for further investments.

  33. Manish Chauhan says:

    @Prasanth : Great

    @Raj : I did not understand you point well .. can you be more clear .


  34. Raj says:

    I am agree with u but how could anybody save when companies are applying rule of 25% variable pay. In current inflation rate it is not possible for everyone specially in metro city to survive with only 75% of salary with savings.

  35. Prasanth says:


    Great article. And my answer to your question is, Yes, I can live with 90% of my take home pay. In fact, I can comfortably live with 70% of my pay. I'm doing this and am saving at least 30% of my takehome pay

  36. Manish Chauhan says:


    I am glad you liked the article . So i found someone who agrees with that sentence . nice πŸ™‚


  37. Ramanan Satha says:

    //when we have money in our hand we will come up with all the reasons why we have expenses and why we cant with any money less than that//
    Very true..
    Worth article, keep up the good work and write more useful posts.

  38. Manish Chauhan says:


    You are worth appreciation for accepting that this is possible . I am sure you can do it and save good part of your salary πŸ™‚

    Btw , Do you see people or families where its possible ?


  39. Nimal says:

    I would agree with you. And I'm just gonna try this in the coming months.

    Thanks for the useful post.

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