last year To build wealth over time, you need to invest certain amount today. This we know. The issue is when ‘how much ?’ You can’t be investing everything you have, have a stingy lifestyle today, in hope that someday you will strike rich. The problem is, when this question is queried about, there is no clear answer about what is the right amount to invest. Even on personal finance column, more focus is on risk appetite, time horizon you are looking, financial goals, future expenses you have planned etc. But, do you think you should invest based only on the idea of how much you will need to buy house, educate your children or something similar? That sounds more like preparing a financial statements of your own, with future projections planned too. Quite dreadful task, from the sound of it. Isn’t it? The point is, investing is mostly done to generate extra income and to create wealth over time. At least that is what attracted most people to investing in first place. Financial Planning & Investing may be related to each other, but they are not handled the same way and definitely, they are not the same thing. How much amount should you invest? So, we are back to our main question, how much should you invest in or what is the right amount? Traditionally, the common figure mentioned is to invest 10% of your income on regular basis. The percentage being constant with your income makes sure that the amount you invest, keeps on increasing with the rise in your income. There is one problem though. This figure puts everyone in the same bracket. Whereas, the financial demands keep on changing. There are times when your spending is quite less and then there are times when they are through the roof! Which means, when you are not able to invest 10%, you invest less and in the normal scenario, you are investing 10% of your income. This used to work well when most of people were in regular jobs with average rise in income over the years. But times have changed, now most of youngsters work on plenty of side projects to make extra money. In this light, this investing principle is less efficient. How much to invest for maximum returns? So, as per current scenarios, the right advice is: You should invest as much as you can afford to invest. Which means, it totally depends on your current income and current liabilities (Read: How to manage your liabilities like a pro) Thus, when your income is less or you have just started to earn, you have many requirements to fulfil. Like buying the household requirements, a vehicle for a better commute to of the fice and other similar expenditure. In this scenario, it is wise to think less about investment and spend more time on buying the right things. Read: How to protect yourself from lifestyle liabilities – the biggest hole in savings Once you have taken care of the immediate need, you should start investing a certain part of your income right away. This can be 10% , 15%, 20%, or even 60%. Just spend what is necessary, some on what you enjoy & simple invest the rest. This takes care of investing the optimum amount right when your responsibilities are less and income is increasing. Most of the time, when your income is good enough, you get married and you are again in low saving mode. And vice versa, when your income increases due to promotion, change of job etc. Being alert part – Finding the right balance between stingy and extravagant This question to decide what is the optimum balance between living a good life vs not spending too much or too less is not an easy one to answer. Though the traditional and still true guideline is: Live below your means. Which in simple terms means not to buy something which is either on credit or simply to keep up with everyone else around you. There is an interesting ancedote which is suitable here: Let’s say you live in a city and you travel twice or thrice a year. There is no use to a sedan to you, if total members of the family are 3-4 and you travel by flight/train most of the times. Any sedan cost Rs. 1-2 Lakh extra for similar powered Hatchback. There are many similar situations, where a little proactive decision can save you quite an amount. This amount is something you can invest without any further thought or emotional pain to yourself. Not spending money on small pleasures of life just to invest more, is something that is not long term sustainable. Most of the times, this comes with a social cost. Emergency Fund Though there can be a separate topic about how to create and develop an emergency fund, it needs a mention here too. You should think about emergency funds along with investments. An emergency fund allows you to keep your investments safe from premature sell off. For the beginner’s it is a good idea to target an emergency fund which is nearly equal to six (6) months of your normal spending. Over time it can be equal to 1 year of your expenditures too. The amount which you consider as an emergency fund, should be in liquid(savings account) or nearly liquid (FDs) form. Something that you can access immediately. Final Thoughts Now, you have a good idea about how much amount to invest. The number that is coming in your mind right now as something that you can put into investments, is the right number for now. Start from there. You can always adjust it later. The only thing you need to be aware about it is, that your investments are your responsibilities. You need to keep it on top of your monthly to-do lists. More than the amount, it is a consistent investment that will help in building wealth for you and stepping grounds for financial freedom. Now a days the good thing is the availability of many automatic investment apps and website. These services can automate your investments as per your predefined criteria & amount on regular basis. And you can change them over time.