New Delhi: Systematic Investment Plans (SIPs) have become a popular route for salaried investors looking to build long-term wealth through regular investments. However, deciding how much of the monthly take-home salary should be invested can be difficult, particularly for those who are just starting their investment journey.

There is no fixed percentage that works for everyone. Income, household expenses, loans, financial goals, emergency savings and risk appetite can all influence how much a person can comfortably invest. One commonly used starting point is the 50-30-20 budgeting rule, under which 50% of income is allocated to needs, 30% to wants and 20% to savings and investments.

For investors following this approach, the 20% allocation can be divided between SIPs, emergency savings and debt repayment depending on their financial situation.

How much should a person earning ₹40,000 invest?

For a monthly take-home salary of ₹40,000, the 50-30-20 framework leaves around ₹8,000 for savings and investments.

That ₹8,000 does not necessarily have to go entirely into an SIP. An investor may divide it between mutual fund investments and an emergency fund.

For a conservative approach, around ₹2,000 could be invested through an SIP and ₹6,000 directed towards an emergency fund. A balanced approach could involve ₹4,000 each for an SIP and emergency savings.

An investment-focused investor with a stronger emergency cushion could consider putting ₹6,000 into an SIP and ₹2,000 towards emergency savings.

These are illustrative allocations rather than fixed recommendations.

For young earners whose salaries are relatively low and whose living costs consume a larger portion of their income, even saving 10–15% of take-home pay towards investments can be a starting point.

SIP allocation for a ₹60,000 salary

For someone earning ₹60,000 a month, the 20% allocation under the 50-30-20 framework works out to ₹12,000.

The amount can be divided differently depending on the investor’s priorities.

A conservative investor could put ₹2,000 into an SIP, ₹6,000 into an emergency fund and ₹4,000 towards debt savings.

Under a balanced approach, ₹4,000 each could go towards SIPs, emergency savings and debt repayment.

An investment-focused investor could allocate ₹6,000 to an SIP, ₹3,000 to an emergency fund and another ₹3,000 towards debt savings.

This approach highlights an important point: an investor’s entire savings allocation does not necessarily need to be directed towards equity mutual funds. Building financial stability through emergency savings and reducing high-cost debt can also be important parts of financial planning.

What if the take-home salary is ₹1 lakh?

For a monthly take-home salary of ₹1 lakh, the 50-30-20 rule suggests keeping at least ₹20,000 aside for savings and investments.

A conservative investor could allocate ₹3,000 towards an SIP, ₹10,000 towards an emergency fund and ₹7,000 towards debt savings.

For a balanced strategy, the ₹20,000 could be split into ₹7,000 for SIPs, ₹7,000 for an emergency fund and ₹6,000 towards debt savings.

An investment-focused investor could put ₹10,000 into an SIP, while allocating ₹5,000 each towards emergency savings and debt repayment.

Investors who have already built an adequate emergency corpus and have limited debt may be able to increase their investment contribution. However, doing so should not leave them without sufficient liquidity for unexpected expenses.

SIP amount should change with financial goals

The appropriate SIP amount can change as an individual’s financial circumstances evolve. A person in the early stages of their career may have limited surplus income because of rent, education loans, family responsibilities and other regular expenses.

As income increases, investors can gradually increase their SIP contributions instead of maintaining the same investment amount for several years.

The key advantage of an SIP is the discipline of investing regularly. SIPs allow investors to put smaller amounts into mutual funds at regular intervals rather than trying to time the market with large one-time investments.

However, mutual fund investments are subject to market risks, and past performance does not guarantee future returns.

Emergency fund should not be ignored

One of the key considerations before increasing an SIP is whether an adequate emergency fund has been created.

An emergency corpus can help meet unexpected expenses such as medical bills, job loss or urgent household requirements without forcing an investor to withdraw long-term investments at an unfavourable time.

This is particularly important for investors who have limited savings or significant financial obligations. In such cases, directing a larger portion of the monthly surplus towards emergency savings may be more appropriate than aggressively increasing SIP investments.

There is no universal SIP formula

The examples for ₹40,000, ₹60,000 and ₹1 lakh salaries are intended only as illustrations. The right allocation depends on factors including existing emergency savings, outstanding loans, monthly expenses, age, investment horizon and financial goals.

The 50-30-20 rule can therefore serve as a starting framework rather than a rigid formula. Investors should review their allocation periodically as their income and financial commitments change.

For those making significant long-term investment decisions, seeking professional financial advice may also help in creating an allocation suited to their individual circumstances.