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Grow Your Wealth with a ₹25,000 to ₹30,000 Salary – Investing 101 ep.2
By Bajaj Broking Team
September 20, 2023
6 mins read
YouTube Blogs
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Today, you may not think that a salary of Rs. 25,000 to Rs. 30,000 is enough to grow your wealth as you may believe that such amounts are just about enough to meet your living expenses. To grow wealth, you need to invest some amount of your capital in certain investment avenues. However, you may be incorrect as you need, at least initially, just a small amount of money to grow your wealth to a certain extent and then work from there as your salary increases over time.
It is important for you to know how to save money from a salary. There are many options open to you to grow your wealth, from a SIP (Systematic Investment Plan) to Mutual Funds. You may invest according to your personal goals and requirements, but it is worth exploring these channels and more in more detail.
Start Investing – Make a Budget
The first step in your investment journey starts with making a budget aligned with your salary/income. If you follow the rule of 50-30-20, you won’t go wrong. In an ideal budget, you should divide your budget into your needs, wants, and investments, and allocate 50% of your income to needs, 30% of your income to wants, and the rest, 20% to investment.
Your needs may comprise elements like groceries, rent, fuel, etc. Your wants can be accounted for, but they should be within limits, and these may include movies, shopping, etc. So, if you are earning a salary of Rs. 35,000 per month, you may allocate amounts accordingly. Finding out how to save money from a salary is easy and once you know how, your investment journey can begin.
In case you can, it may be prudent to sacrifice some wants presently so you can allocate more of your capital to investment. If you start investing at the age of 30 and wish to have a retirement corpus by the age of 60, you may have around Rs. 3 crore or more by the time you retire. Of course, taking inflation into account, this may not seem like enough, but consider the fact that your salary will gradually increase and so can your investment in other channels.
When you initially begin to earn a salary, you may not have any responsibilities like a family to consider. Your wealth creation plan can begin at this stage of your life. This is the time to invest a small portion of your salary instead of just splurging it on unnecessary wants like gadgets and other luxuries. You should note that while investing, you must take a long-term view of building your capital.
If you are earning a salary of, say, Rs. 25,000 per month, you can safely invest a small amount in a scheme like a SIP. Systematic Investment Plans are potentially worth investing small amounts in, like say, Rs. 1,000 per month. In some plans with returns amounting to 8%, you can easily build your principal amount to around Rs. 1,80,000 in a span of 10 years, assuming you start your career between the age of 20-25. Through a SIP, and the power of compounding it gives you, your money grows exponentially. Once your investment has grown, you can, perhaps, reinvest that amount in other lucrative instruments. If you want to know how much to save from a salary, there is no fixed amount and you can save as much as you can afford.
What people do not grasp when they think of investment is that you do not require that much capital to start your investment journey. By the time you think of investing, say, at the age of 30-35, you may have additional responsibilities like a family and investing becomes that much harder than if you had started when you were younger.
You have already read about a SIP and how it can build your wealth through compounding. So, you can start your investment path by investing in a SIP. However, there are other channels of investment open to you, and if you have some capital to spare, there is no harm in exploring these as well. All you should remember is that any wealth creation plan is unique to an individual investor. Here are some other investment avenues to explore:
Mutual Funds
A mutual fund is essentially a fund in which several investors pool their money into a fund of investments and securities and returns are distributed depending on how much each investor invests. Aligned with your needs, you can opt for different types of mutual funds – equity, hybrid, or debt, in which the allocation of your capital is made either to equity, a combination of equity and debt (hybrid), or debt. Equity funds may offer high returns but come with potentially more research, Hybrid funds offer you a balance of asset allocation and mitigate your risk. Debt funds give you low returns but a lesser degree of risk.
Mutual funds offer many perks such as being managed by a professional fund manager, portfolio diversification, and the fact that investors needn’t do much research except to locate a fund that suits their individual requirements and risk appetite. Now that you know how to save money from a salary, you can go ahead and start investing in mutual funds.
Gold
Another investment channel that hedges against inflation and is bound to potentially give you returns, in the long run, is gold. You can invest in physical metal or Gold ETFs.
Shares and Stocks
The equity markets are great places to invest if you don’t mind the potential risks involved and have a long-term investment horizon. You may research sectors and industries of the stocks you wish to invest in and purchase these after you open a Demat account linked to a trading account. If you want a regular income, you may think of dividend-yield stocks. With stocks, a wealth creation plan can certainly take shape, but these may be potentially risky investments and long-term investments.
Insurance
It is prudent to think of having insurance plans while you are young, as you are offered low premiums. If you have dependents to consider, you may think of term insurance that gives you security, and you may opt for a plan that, say, gives you up to 12% of your annual income.
You should also consider health insurance plans to safeguard you and your family against any health-related emergencies. These could crop up suddenly and may require large amounts to be spent.
Invest According to Your Requirements
While you are planning your investment, consider your individual needs and requirements. You must have a long-term approach as you don’t want to be left without enough income once you retire. Health and term insurance gives you additional security against emergencies and unforeseen events.
Wealth building refers to the process of accumulating financial assets over time through income generation, investments, and smart financial decisions. It is important because it provides long-term financial security, enables financial independence, and helps achieve life goals like retirement, homeownership, or education. A structured wealth-building plan ensures financial stability and protection against economic uncertainties.
How does Wealth Creation differ from saving money?
Answer Field
Wealth creation involves growing assets through investments, such as stocks, real estate, and businesses, whereas saving money focuses on setting aside income in secure, low-risk options like savings accounts. Savings retain value but do not significantly grow, while wealth creation compounds financial growth, helping individuals achieve financial freedom faster by leveraging returns on investments and diversifying assets.
What Are the Keys to Building Wealth Through Investments successfully?
Answer Field
Successful wealth building through investments requires discipline, diversification, and long-term planning. Key factors include choosing the right assets, understanding market trends, minimizing risks, and consistently investing over time. Compounding interest, asset allocation, and staying patient during market fluctuations are essential. Avoiding impulsive decisions and having a financial strategy aligned with goals further enhances wealth-building success.
Which is the popular wealth creation plan for long-term financial security?
Answer Field
Any wealth creation plan depends on individual financial goals, risk appetite, and time horizon. A diversified portfolio including equity investments, mutual funds, real estate, and retirement plans like PPF or NPS ensures long-term financial security. SIPs in mutual funds, index funds, and tax-efficient investment options further optimize returns while reducing risks, ensuring wealth accumulation over time.
What are the risks involved in investment for wealth creation?
Answer Field
Investment risks include market volatility, inflation, liquidity risks, and interest rate fluctuations. Stocks may experience price drops, real estate faces market downturns, and fixed-income investments are impacted by inflation. Diversification, risk assessment, and choosing investment vehicles based on financial goals help mitigate risks while ensuring wealth growth and long-term financial stability.
How can beginners choose the right investment for wealth creation?
Answer Field
Beginners should start with low-risk investments like index funds, mutual funds, or fixed deposits before exploring high-return options. Understanding risk tolerance, setting financial goals, and consulting financial advisors can help. Regular investments through SIPs and long-term strategies like retirement funds or real estate can help in steady and sustainable wealth accumulation.
Does Wealth Building require high-income, or can it be done with a modest salary?
Answer Field
Wealth building is possible with a modest salary through disciplined saving and smart investing. Budgeting, eliminating unnecessary expenses, and consistently investing in long-term assets like mutual funds, stocks, or retirement plans help create wealth. The power of compounding ensures that even small, regular investments grow significantly over time, making wealth accumulation achievable for everyone.
