A good salary does not automatically mean good finances. You could earn ₹15 lakh a year and still feel financially stretched. Someone earning less may have fewer loans, higher savings, and a growing investment portfolio.
The problem is that financial success is often measured by what we can see, the car someone drives, the house they live in, the holidays they take, or the lifestyle they post online. But these things don't tell you much about their actual financial health.
A better approach is to look at a few numbers in your own financial life. Here are nine simple benchmarks that can help you understand where you stand.
1. Are you saving at least 15–20% of your income?
Your savings rate is one of the simplest ways to check whether your income is translating into wealth creation.
Savings Rate = Total Savings ÷ Total Income × 100
For example, if you earn ₹1,00,000 a month and save ₹20,000, your savings rate is 20%.
Your savings can include money put aside for investments, EPF or NPS contributions, and other deliberate savings. The important part is consistency.
If saving 15–20% isn't possible right now, even starting with 10% and gradually increasing it as your income grows can help.
And remember, increasing the amount you invest regularly can sometimes make a bigger difference than chasing slightly higher returns.
2. Is your credit utilization below 30%?
Your credit card limit isn't the same as money you can comfortably afford to spend. Credit utilization measures how much of your available revolving credit you are actually using.
Credit Utilisation = Outstanding Credit ÷ Total Credit Limit × 100
For example, if your total credit limit is ₹2 lakh and your outstanding balance is ₹40,000, your utilisation is 20%.
Keeping utilization below 30% is generally considered a useful benchmark. But utilization is only one part of responsible credit management. Carrying balances and paying only the minimum due can make credit card debt increasingly expensive.
3. Are your housing costs below 30% of income?
Rent or a home loan EMI can take up a large part of your monthly cash flow. A useful benchmark is to keep total housing-related costs around 30% or less of your income.
Housing Ratio = Total Housing Costs ÷ Monthly Income × 100
Depending on where you live and your income level, this number can vary. But the broader idea is simple: your home should not leave so little cash flow that saving and investing become difficult. If you have a home loan, occasional prepayments can also reduce the interest burden and shorten the loan tenure, depending on the loan terms.
4. Do your monthly debt payments stay below 35% of income?
A loan may be affordable individually but become difficult when several EMIs are combined. You can track this through your debt servicing ratio.
Debt Servicing Ratio = Total Monthly Debt Payments ÷ Monthly Income × 100
A ratio below 35% is a useful benchmark. If a large portion of your income is already committed to EMIs, taking on another loan can put pressure on your monthly finances. Before adding new debt, look at the total picture rather than just asking whether you can afford one more EMI.
5. Is less than half of your wealth tied up in debt?
Another useful number is your debt-to-asset ratio.
Debt-to-Asset Ratio = Total Debt ÷ Total Assets × 100
Suppose you own assets worth ₹1 crore and have a total outstanding debt of ₹30 lakh. Your debt-to-asset ratio would be 30%.
A lower ratio generally means you have more assets relative to your outstanding debt. This number can naturally be higher earlier in life, especially if you have recently taken a home loan. What matters is how the ratio changes as your assets grow and your debt reduces.
6. Do you have enough liquid assets?
Not every asset can be converted into cash quickly. Your house, long-term investments, or jewellery may have value, but they may not be the first things you want to sell when an unexpected expense arrives.
Liquid assets can include cash, bank savings, fixed deposits, and other investments that can be accessed relatively easily. One benchmark from the source material is to keep at least 15% of your net worth in liquid assets.
Liquid Assets to Net Worth = Liquid Assets ÷ Net Worth × 100
This gives you a financial cushion without forcing you to disturb long-term investments whenever an emergency comes up.
7. Are at least 50% of your net worth in investment assets?
Your net worth isn't necessarily the same as your wealth-generating assets. For example, the house you live in and the car you drive may be valuable, but they are primarily consumption or lifestyle assets.
Stocks, mutual funds, ETFs, NPS and investment property are different because they are generally held with the expectation of generating future wealth.
Investment Assets to Net Worth = Investment Assets ÷ Net Worth × 100
A useful benchmark is to have around 50% or more of your net worth in investment assets. The exact number will naturally differ from person to person depending on age, goals, and lifestyle.
8. Are your retirement savings keeping pace?
Retirement planning can feel far away when you're in your 20s or 30s. That's exactly why it can be useful to have milestones instead of waiting until retirement is close.
One commonly used benchmark is:
Age 30: 1× annual salary Age 40: 3× annual salary **Age 50: **6× annual salary Age 60: 8× annual salary
Another approach is the 25× rule, where your retirement corpus is estimated at around 25 times your first year's post-retirement expenses.
For example, if you expect to need ₹10 lakh in your first year of retirement, a starting estimate would be ₹2.5 crore.
However, inflation, healthcare costs, retirement age, lifestyle, and expected investment returns can significantly change the amount you actually need. So treat such rules as checkpoints, not guarantees.
9. Is your net worth increasing over time?
This may be the simplest number of them all.
Net Worth = Total Assets − Total Liabilities
If you own ₹80 lakh worth of assets and owe ₹30 lakh, your net worth is ₹50 lakh.
Don't look at this number just once. Track it periodically. If your savings and investments are growing while your debt is coming down, your net worth should gradually move higher. That trend can tell you more about your financial progress than comparing your lifestyle with someone else's.
The Numbers That Matter
You don’t need to score perfectly on every measure. Your finances will change with your income, responsibilities, loans, and life stage. The goal is to ask better questions: Am I saving enough? Is my debt manageable? Are my investments and net worth moving in the right direction? That’s a more useful measure of financial health than simply comparing yourself with others.
Explore our personal finance calculators and see how different plans could work for you. Try the calculators
Disclaimer: The information provided in our blogs is for informational purposes only and should not be construed as financial, investment, or trading advice. Trading and investing in the securities market carries risk. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. Copyrighted and original content for your trading and investing needs.
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