In December last year, 29-year-old software engineer Rohan Mehta from Bengaluru faced a sobering reality check. Despite earning ₹1.2 lakh per month, his total savings for the year barely crossed ₹10,000. “I thought I was doing well…dining out, travelling, buying gadgets on EMI. But looking back, I realised I had nothing tangible to show for a year of hard work,” he recalls.
Rohan’s predicament mirrors a broader national trend. According to the RBI’s 2024–25 Household Savings Report, gross household savings have plummeted to 5.1% of income, a far cry from the 20% benchmark deemed necessary for financial security. A decade ago, savings were closer to 30%, highlighting a drastic behavioural shift in how Indians manage their money.
Why Are Savings Falling?
Several factors converge to explain this steep decline:
- Instant Gratification via Digital Commerce: Almost every essential and non-essential purchase is now a click away, fueling impulsive spending.
- Generational Mindset: Many Gen Z earners have limited familial responsibilities. They prioritise lifestyle and experiences today, assuming future earnings will compensate for low savings.
- Advertising Saturation: Research indicates that the average consumer is exposed to 8,000-9,000 brand messages daily, constantly encouraging spending across all price points.
The result: low savings jeopardise financial security and make financial freedom increasingly elusive.
The 50:30:20 Rule: A Starting Point, Not the Finish Line
A widely cited principle in personal finance is the 50:30:20 rule:
- 50% of income towards essential needs
- 30% towards wants and lifestyle
- 20% towards savings
While this framework ensures basic financial stability, it is insufficient for long-term resilience. One unforeseen crisis can wipe out years of progress.
To attain financial freedom, individuals should aim to save at least 30% of their income, with investments compounding at double-digit returns for a decade or more. For wealth accumulation, saving 50% of income over 15-20 years, combined with disciplined compounding, is the most reliable path.
Many, however, fall into the trap of prioritising appearances over actual wealth. Spending to look rich rather than be rich is a costly mindset.
Three Tactical Saving Hacks to Build Prosperity in 90 Days
1. Differentiate Between Good and Bad Expenses
All spending is not equal. The key is to distinguish between expenditures that generate value versus those that drain resources:
- Good expenses: Investments in self-growth, skill-building, health, or professional development. For example, one client allocates 10% of earnings annually to personal development courses and workshops.
- Bad expenses: Impulse or status-driven purchases that add little long-term value. Another client’s habit of buying excessive clothing offered no measurable benefit beyond temporary satisfaction.
Rule of thumb: every expense should either enhance future earning potential or measurably improve quality of life.
2. Set Clear, Quantifiable Financial Goals
Financial discipline begins with clear, measurable goals. Entrepreneurs, professionals, and salaried employees alike benefit from tracking both income and savings objectives:
A close associate initially focused solely on increasing annual income. Upon realising that savings, not income, dictate financial health, he revised his approach. Today, he sets both income and savings targets annually, reviewing them weekly. The result: increased financial stability and accelerated wealth accumulation.
Practical tip: Document goals, assign timelines, and regularly review progress. What is measured invariably improves.
3. Minimise Liabilities Strategically
Debt is often unavoidable, particularly for home ownership, but mismanaged liabilities erode wealth. Key guidelines:
- Avoid loans that consume more than 30% of gross income.
- Prioritise high-interest debts for early repayment.
- Consider delaying discretionary loans until savings goals are on track.
Prudent management of liabilities ensures that income is optimally allocated to growth, security, and long-term wealth rather than servicing debt.
(Anirudh Gupta is a finance professional. He is the CEO, Ashiana Financial Services, Mumbai)
