How much of your salary should go into a SIP?
The stock answer is "20% of income", and it is useless without sequence. Investing 20% while carrying an emergency-fund gap and a credit-card balance is worse than investing 5% with those handled. What you fix first matters more than the percentage.
The order, which matters more than the number
- Clear high-interest debt. A credit card at 36% or a personal loan at 15% is a guaranteed negative return. Paying it off returns that rate risk-free, which beats any equity assumption. Nothing else competes.
- Build three to six months of expenses in something liquid. Not in equity. This is the buffer that stops you redeeming a long-term investment during a job loss, which is when markets are usually also down. Without it, every other plan is fragile.
- Get term life and health insurance. A ₹1 crore term policy costs a fraction of a monthly SIP for a healthy thirty-year-old, and a single hospitalisation can wipe out years of investing. Insurance is not an investment and should not be bought as one.
- Then invest, and invest as much as is genuinely sustainable.
Steps one to three are not "before you start investing" in a motivational sense. They are the things that determine whether your investing survives contact with real life.
Worked through on ₹1,00,000 a month take-home
| Where it goes | Amount | Share |
|---|---|---|
| Rent, bills, food, transport | ₹45,000 | 45% |
| EMIs | ₹15,000 | 15% |
| Insurance premiums | ₹3,000 | 3% |
| Discretionary | ₹12,000 | 12% |
| Emergency fund, until it is full | ₹5,000 | 5% |
| SIP | ₹20,000 | 20% |
That ₹20,000 a month at 12% for 20 years reaches ₹1,99,82,958, of which ₹1.52 Cr is compounding rather than your money. In today's purchasing power at 6% inflation, that is about ₹62.31 L.
Add a 10% annual step-up as your salary rises and the same starting instalment reaches ₹3,97,77,431. That difference — from one instruction set once — is larger than most people's entire expected gain from picking better funds.
Rough benchmarks by life stage
Starting points to argue with, not rules:
| Stage | Share | Why |
|---|---|---|
| Early 20s, no dependants | 20–30% | Lowest fixed costs you will ever have, and the longest runway. This is the cheapest decade to be aggressive in. |
| Late 20s to 30s, family forming | 15–25% | Costs rise faster than income for a while. Protect the habit rather than the percentage. |
| 40s, peak earnings | 25–35% | Usually the highest surplus and the last stretch with real compounding time. Under-investing here is the common regret. |
| 50s onward | As much as possible | Short runway, so contribution size does the work compounding no longer can. |
Notice the shape: the recommended share rises with age, because so does income. Nearly everyone gets this backwards and invests most aggressively as a proportion when they are earning least.
The only test that matters
Could you keep this up through a bad year?
Pick an amount you would still pay in a month with an unexpected medical bill, a wedding, and a delayed bonus. That number is your SIP. Anything above it is a number you will cancel, and a cancelled SIP compounds nothing.
Then raise it every year with a step-up instruction, which lets you start conservative without staying conservative.
Questions people actually ask
Is the 50-30-20 rule any good for India?
As a rough shape, yes; as a target, it is often unrealistic. In metros where rent alone can take 30–40% of take-home, holding needs to 50% is not achievable for many people, and treating that as failure leads to giving up entirely.
Use the sequence in this guide instead: debt, buffer, insurance, then invest whatever is sustainable — even if that is 8% rather than 20%.
Should I invest while I have a home loan?
Usually yes, alongside. Home loan rates are typically well below equity return assumptions, and paying one down early gives up compounding on money you can never re-invest at that horizon.
Credit cards and personal loans are the opposite: clear those first. The rate is the deciding factor, not the label.
How much should I invest to retire comfortably?
It depends on your spending, not your income — someone spending ₹40,000 a month needs a far smaller corpus than someone spending ₹1.5 lakh on the same salary.
Put your actual figures into the retirement planner, which inflates your costs to retirement and works backwards to the monthly SIP.
Should I keep the emergency fund in a mutual fund?
Not in an equity one. The point of the buffer is that it is there when everything else is going wrong, and job losses correlate with market falls.
A savings account, a sweep FD or a liquid fund is appropriate. You are buying availability, not return.
Where these numbers come from
- Reserve Bank of India — inflation targeting and deposit data
- AMFI — mutual fund industry data and investor education
- SEBI — regulation and registered adviser search