Increase Savings or Increase Income

A lot of people try to save a lot of money but there is always a ceiling which is the maximum you can save. You need some money for your living expense and the remaining can be saved or invested. Now even your salary increases, if the living expenses remains the same your savings can increase drastically.

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So the question is what should be your main goal. Increase your savings or increase income. For example, if you increase your savings then you have to reduce your expenses. Now you can reduce your expenses to some extent and not fully. So that is a good start but you cannot save a lot because there is a limit on how much you can save.

Now let's take an example of increasing income. Say you were earning Rs 100 and savings 50% I.e Rs 50. Now you have doubled your income and now you are earning Rs 200, and your expenses have also increased a bit and now it's Rs 75. So now you have Rs 125 which you can save which is 1.5X than what you were saving.

So since you have increased your income, your expenses have also increased but along with that your savings were also increased. So it should be the ideal case, where whenever your salary increases your savings should increase. Now the problem is that for most people whenever their salary increases, their expense drastically increases and thus their savings remain the same.

So when people starts to earn more, they try to stay in bigger house, drive bigger car and what nor which increases their expenses. And that's why it's necessary to try to keep the expenses as percentage of your income. That means if you are earning Rs 100, try to save 40%. Similarly if you are earning Rs 200, then also try to save 40%. In this way your percentage of savings remain the same, you can try to omcrease too but it should not go down.

Posted Using INLEO