How Much Money Should You Have At The Age Of 25, 30, 35 and 40 In India?

If the value of all your assets is Rs. 10 lakhs and the total money you have to pay to people is about Rs. 7 lakhs. Your net worth is 10 minus 7, which is 3 lakhs. Why is this net worth number important? Because this is the real value that you own. Now the question arises, at every age approximately how much should your net worth be? What is the way to think about it? If I had to localize it, that in the Indian environment, at the age of 25, 30, 35, 40, what should your net worth approximately be? What would that number be? That is what people try to figure out in this post.

How Much Money Should You Have At The Age Of 25, 30, 35 and 40 In India

Let's start with a slightly sad thing first, that there is no official data that tells on an average how much an Indian saves or how much he owns. Basically, how much is the asset side of net worth. We are told according to data, how much people on an average earn? So the salary of a regular male salaried worker is about Rs. 24,417. And the salary of a regular female salaried employee is about Rs. 18,350. This is verified government current data.

So when we talk about net worth and what should be your ideal net worth? It will be very difficult to give it a single number. Why? Because the life of every 25, 30, 35, 40-year-old is very different. One 25-year-old is earning Rs. 20,000 a month. Another 25-year-old is earning Rs. 60,000 a month. How can their net worth be the same? It shouldn't be. So you will find that often net worth and usually your financial health, that is measured in multiples of your salary or multiples of your expenses. Why? Because that reflects your lifestyle. If you are earning Rs. 20,000, your lifestyle will be according to Rs. 20,000 income. If you are earning 60,000 then it will be according to Rs. 60,000 income. If you spend Rs. 15,000 every month then your lifestyle will be accordingly. If you spend Rs. 50,000 then it will be accordingly. So when I will share all these benchmarks with you, it will be mostly in multiples of your yearly income or your monthly income. And that is how you will know that if someone else's income is different then his net worth can also be different. And that has nothing to do with my life or my income. Let's try and see what your net worth can be at different ages. Let's start.

At the age of 25

At the age of 25, I will expect three things from you to start building your net worth. First of all, net worth at the age of 25 should not be much. If it is, then you are doing something wrong. Not because, oh net worth should not be there. Of course it's a great thing to have a net worth. But if that is your focus then most likely you are investing in the wrong things. At 25 years of age, the best investment is in yourself. Your studies, your skills, your learning, your exposure. That is where a bulk of your money should be going. Because that Rs. 500 SIP will not change your life. It will not make you a crorepati. Yes, it will inculcate a good habit. But if you tried to make that same Rs. 500 into Rs. 5,000 and you stopped growth, then with that Rs. 5,000 you will not become a crorepati but you will never be able to earn more money also because you didn't invest in skills at all. So at 25, the three things that I would love for you to have: at any point, one month's salary should be in your bank as cash, a regular SIP should be running, whatever that amount is, and you should not have any debt. Neither credit card nor any personal loan, no loan app, nothing. At the age of 25, the biggest danger is not not investing, the biggest danger is getting trapped in loans. So just these three things. One month's money, one SIP, no debt.

Let's come to 30 years

By the time you reach 30 years, you should ideally have your one year income in your assets. So if you are earning Rs. 10 lakhs, you should have Rs. 10 lakhs invested. If you are earning Rs. 1 lakh, you should have Rs. 1 lakh invested. You should have three to six months of expenses as your emergency fund. You should have a term life insurance which is 10 to 15 times the cover of your salary. And you should have health cover in addition to your corporate health insurance. Yes, this is also the age where you might have home loan debt, marriage loan debt, maybe your education loan debt. And if it is either of these, it's not a bad place to be as long as you have built that one year of invested assets.

Let's come to the age of 35

By the time you reach this age, according to India, I think you should have at least two to three years of your yearly income as your investments. This is because by 35 you should now seriously start saving for your retirement. There is no social security. You will have to bear your own expenses. The responsibility of parents is slowly starting to come. The responsibility of children is starting to come. You will be able to plan all these things only when you have this two to three years of invested amount. Remember that this also includes your house. By the way, so it's not like, how can it be like this, if my salary is Rs. 20 lakhs, where would I have invested Rs. 60 lakhs in stocks? No. It is possible that you have a house. You have taken a house worth one crore. There is a loan of 60 lakhs running on it. So Rs. 40 lakhs is technically your invested asset value. Which you have built over the years. At any point of time, at least 6 months of emergency fund, one running SIP should be there. There should be no credit card debt. And maximum one loan should be on your head. Ideally all other loans should have been paid off by this age.

Now let's come to the age of 40

At the age of 40, you should ideally have between four to six times your yearly income as your invested amount. You should ideally have 9 to 12 months of emergency fund, minimum 6 months definitely. One running SIP, maximum one loan, your own health cover, your own life insurance.

Also Read, What is the 50-30-20 Rules in Finance.

Now if you are scared by this assessment, let me tell you two or three more things that work in your favor. Number one, data shows that India's salaries are back-loaded. This means in the beginning you don't earn much money, so in your 20s the salary and the salary growth is quite thin. But it compounds very fast in your 30s, in your 40s. So if you are scared that how will I accumulate so much invested till 35-40, you have to rely on the fact that as your skills, your experience will increase, your income will also rise accordingly.

Number two, the magic of compounding. It's not your fault but you don't have any other option also. You have to believe that compounding is magical. What does this mean? When you are 25 years old, you have understood compounding only theoretically. You have not experienced it. To experience compounding, the most important thing is time, 10-20 years. At the age of 25 you haven't got those 10-20 years at all. But by the time you reach 40-45 years, you will be able to see what 10-15 years, 20 years of dedication brings. Not just in your experience, also in your investments. That Rs. 500 SIP that you started at the age of 25. Today that 500 is becoming something every month and your money is compounding at 12-13% every year. Means every five to six years your money is doubling. That is magic. You will only get to see once you start reaching the age of 35 and 40.

Our children are going to be very independent. They will not need us as much as we needed our parents. Vice versa, you will also not need them as much as your parents needed you. Which means that it is quite likely that by the time you are 40-45, you only have to take care of yourself and your life partner. You wouldn't have to attend to your kids as much. Your parents at some point of time will pass. So their care will also not be there. And you as a couple will only have yourself as a responsibility. And that means that whatever savings you have, it will last a lot longer because your responsibilities are a lot lesser.

Also Read, How to Manage Money?  5 Steps Simple Financial Plan

Conclusion

In a world which is changing so fast, where expenses are increasing very fast. You have to prepare yourself. And the right way to do that is to make sure that your income, your lifestyle is matching and your lifestyle is never exceeding the income that you have designed for yourself. If you plan your life keeping these benchmarks in mind, you will always be in control of the finances and the life which you have built around it.