Financial Planning for Salaried Employees in India

Complete guide to financial planning for Indian salaried professionals. Learn about budgeting, saving, investing, insurance, and tax planning with practical salary-based frameworks.

As a salaried employee, you have predictable income—a significant advantage for financial planning. But many waste this advantage through poor planning, leaving money on the table and goals unfunded.

Here's a comprehensive framework to make the most of your salary.

The Financial Planning Framework

Step 1: Know Your Numbers

Metric	How to Calculate	Target
Take-home salary	CTC - Deductions	Know exact amount
Fixed expenses	Rent + EMIs + Utilities + Insurance	< 50% of take-home
Variable expenses	Food + Transport + Entertainment	Track monthly
Savings rate	(Income - Expenses) / Income	> 20%

Start with: Use our SIP Calculator to see how savings compound.

Step 2: The 50-30-20 Rule (Adapted)

Category	Allocation	Includes
Needs	50%	Rent, utilities, groceries, EMIs, insurance
Wants	30%	Dining out, entertainment, shopping, travel
Savings/Investments	20%	SIP, PPF, NPS, emergency fund

Example for ₹80,000 take-home:

Needs: ₹40,000
Wants: ₹24,000
Savings: ₹16,000

Building Your Financial Foundation

Priority 1: Emergency Fund

Expense Level	6-Month Fund	Where to Keep
₹30,000/month	₹1,80,000	Liquid fund
₹50,000/month	₹3,00,000	Liquid fund
₹80,000/month	₹4,80,000	Liquid fund

Build this first before any other investments.

Priority 2: Adequate Insurance

Insurance Type	Coverage Needed	Annual Cost (Approx)
Term insurance	10-15x annual income	₹10,000-25,000
Health insurance	₹10-25 L family floater	₹15,000-40,000
Personal accident	5x annual income	₹1,000-3,000

Insurance is non-negotiable for anyone with dependents.

Priority 3: Clear High-Interest Debt

Debt Type	Interest	Action
Credit card	24-42%	Pay off immediately
Personal loan	12-18%	Prepay aggressively
Car loan	9-12%	Regular payments
Home loan	7-9%	Can maintain (tax benefits)

Use our EMI Calculator to plan debt repayment.

Investment Strategy by Salary Level

₹30,000-50,000 Take-Home

Investment	Amount	Where
Emergency fund (build first)	₹5,000	Liquid fund
SIP	₹3,000-5,000	Flexi-cap fund
PPF (optional)	₹500-2,000	Post office/Bank
Health insurance	₹1,000	Term plan

Focus: Build habits, start small, stay consistent.

₹50,000-1,00,000 Take-Home

Investment	Amount	Where
SIP	₹8,000-15,000	2-3 diversified funds
PPF	₹5,000-10,000	For 80C + safety
NPS	₹4,167	For 80CCD(1B) benefit
Term + Health	₹2,500-4,000	Adequate coverage

Focus: Tax planning, diversification, goal-based investing.

₹1,00,000+ Take-Home

Investment	Amount	Where
SIP	₹20,000-40,000	Diversified + international
PPF	₹12,500	Max limit for safety
NPS	₹16,667	Max 80CCD(1) + 80CCD(1B)
Term + Health	₹3,000-5,000	Comprehensive coverage
Additional	₹5,000+	Direct equity, gold ETF

Focus: Wealth creation, tax efficiency, legacy planning.

Tax Planning for Salaried Employees

Optimize Your Salary Structure

Component	Tax Treatment	Optimize
Basic salary	Fully taxable	Keep 40-50% of CTC
HRA	Exempt (conditions)	Maximize if paying rent
LTA	Exempt (travel)	Use for actual travel
NPS employer	80CCD(2) exempt	Request if offered
Food coupons	Exempt up to ₹50/meal	Utilize fully
Medical reimbursement	Exempt	Submit bills

Tax Deductions Checklist

Section	Deduction	Maximum	Investment
80C	Various	₹1.5 L	EPF, PPF, ELSS, life insurance
80CCD(1B)	NPS	₹50 K	NPS contribution
80D	Health insurance	₹25-75 K	Self + parents premium
80E	Education loan	No limit	Interest on education loan
80TTA/TTB	Savings interest	₹10-50 K	Savings account interest
24(b)	Home loan interest	₹2 L	Home loan for self-occupied

Tax Regime Comparison

Old Regime	New Regime
Deductions available	Limited deductions
Higher tax rates	Lower tax rates
Better if deductions > ₹3.75 L	Better if minimal deductions

Generally, old regime is better for those with home loan + full 80C.

Goal-Based Planning

Mapping Goals to Investments

Goal	Timeline	Investment	Calculator
Emergency fund	Now	Liquid fund	-
Vacation	1-2 years	Debt fund/RD	RD Calculator
Car	2-3 years	Debt fund/FD	FD Calculator
House down payment	3-5 years	Balanced fund	SIP Calculator
Child education	10-18 years	Equity fund SIP	SIP Calculator
Retirement	20-30 years	Equity + NPS	NPS Calculator

Goal Calculation Examples

Child's Education (₹30 L in 15 years):

Required SIP at 12%: ₹6,000/month
Use SIP Calculator

House Down Payment (₹20 L in 5 years):

Required SIP at 10%: ₹25,900/month
Or balanced approach: ₹20,000/month + bonus

Retirement (₹3 Cr in 25 years):

Required SIP at 12%: ₹23,000/month
Use PPF Calculator for guaranteed portion

Monthly Money Management

Salary Day Routine

Action	When	Purpose
SIP auto-debit	Salary day + 1	Invest first
EMI payment	As scheduled	Debt service
Insurance premium	Monthly (if possible)	Risk cover
Fixed expenses transfer	Salary day	Bill payments
Spending money	After above	Remainder

The Automation Framework

Expense Type	Automation Method
SIP	Auto-debit mandate
PPF	Standing instruction
NPS	Auto-debit
EMIs	Auto-debit
Insurance	Annual auto-pay
Rent	Recurring transfer

Automate everything to remove decision fatigue and ensure consistency.

Managing Salary Growth

When You Get a Raise

Raise Amount	Allocation
First 50%	Increase investments
Next 30%	Lifestyle improvement
Last 20%	Buffer/savings

Example: ₹10,000 raise

₹5,000 → Increase SIP
₹3,000 → Better lifestyle
₹2,000 → Emergency fund/buffer

Increment Investment Strategy

Year	Salary	SIP	Lifestyle
1	₹60K	₹10K (17%)	₹50K
2 (+10%)	₹66K	₹13K (20%)	₹53K
3 (+10%)	₹72.6K	₹16.5K (23%)	₹56K
5	₹87.8K	₹22K (25%)	₹65.8K

SIP grows faster than lifestyle = wealth creation.

Common Financial Mistakes

Mistake 1: Delaying Investments

Starting Age	₹10K/Month SIP	Corpus at 60
25	₹10K × 35 years	₹5.8 Cr
30	₹10K × 30 years	₹3.5 Cr
35	₹10K × 25 years	₹1.9 Cr

5 years delay = ₹2.3 Cr less.

Mistake 2: Insurance Instead of Investment

Product	Return	Verdict
Endowment plan	4-5%	Avoid
ULIP	6-8% (high charges)	Usually avoid
Term + MF combo	12%+	Better

Never mix insurance with investment.

Mistake 3: No Emergency Fund

Scenario	Without Fund	With Fund
Job loss	Break FD (penalty), sell MF (loss)	Use emergency fund
Medical emergency	Credit card (24% interest)	Use emergency fund

Mistake 4: Ignoring Tax Planning

Tax Bracket	80C Unused	Tax Lost
20%	₹1.5 L	₹30,000
30%	₹1.5 L	₹45,000

Use all deductions before year-end.

Year-End Financial Checklist

January-March Priorities

Task	Action
80C status	Complete remaining investments
Insurance renewal	Review and renew
Tax documents	Collect all proofs
Investment proof	Submit to employer

April Priorities

Task	Action
Review portfolio	Rebalance if needed
Update goals	Adjust for inflation
Increase SIP	With new salary
File returns	After Form 16

Building Net Worth

Net Worth Tracking

Asset	Example Value
Mutual funds	₹15,00,000
EPF/PPF	₹8,00,000
Bank balance	₹2,00,000
Gold/other	₹3,00,000
Total Assets	₹28,00,000
Home loan outstanding	-₹35,00,000
Car loan	-₹3,00,000
Total Liabilities	-₹38,00,000
Net Worth	-₹10,00,000

Track quarterly and aim for positive net worth growth.

Net Worth Growth Targets

Age	Net Worth Target
30	1x annual income
35	2-3x annual income
40	4-6x annual income
50	8-12x annual income
60	15-20x annual income

Conclusion

Priority	Action	Timeline
1	Build 6-month emergency fund	First
2	Get adequate insurance	Immediate
3	Clear high-interest debt	ASAP
4	Maximize tax benefits	Before March
5	Start goal-based SIPs	After above
6	Increase investments with salary	Every increment
7	Review and rebalance	Annually

The salaried advantage:

Predictable income enables planning
EPF/gratuity provides base retirement
Tax deductions reduce burden
Auto-debit makes discipline easy

Use your salary predictability to build systematic wealth. Start today, automate everything, and let compounding work for you.

Plan your investments: Use our SIP Calculator, EMI Calculator, and PPF Calculator to model your financial plan.