Do you have a high paying job? Use the surplus to diversify your investment portfolio

Forty-something Abhinav earns a high salary. He spends a lot on cars, clothes, holidays and other such luxuries. His logic is that since he is earning so much, he should not deny himself or his family anything that his money can buy. He has invested in a house in his hometown and has booked another property in a large city. He is not worried about not saving enough as he knows he has many more earning years left. His wife, however, is keen to enhance their savings. So how much should Abhinav be saving?

Abhinav represents the new generation of managers who land plum jobs through campus placements and then on enjoy a steady increase in income, with which comes confidence to spend. Abhinav should grab the opportunity of his high paying job to create a diversified wealth portfolio.

Abhinav should focus on wealth creation given the regular surplus that his household can generate. The income of a household can be apportioned in three ways—mandatory expenses to run the household, discretionary expenses on lifestyle items and surplus representing the savings.


Typically, in the early days of earning, a large portion of the income is spent on mandatory expenses, leaving a small portion for lifestyle expenses and no savings. As the income increases, the share of mandatory expenses falls, leaving a larger portion for lifestyle expenses. Then comes a stage in the career of these new-age professionals, when their incomes are catapulted to a new level.

The income surplus available to Abhinav even after meeting lifestyle expenses is quite high. Mandatory expenses are a small portion of the income. This represents the ideal phase to build long-term wealth. Abhinav should put a road map in place for saving and investing most of his additional income, so that he does not find himself in any risk after he crosses his peak earning age in his 50s. Abhinav’s investments so far are concentrated in property. He can rebalance his portfolio by ensuring that his new savings are invested in long-term liquid investments such as equity and equity funds. He runs the risk of old-age penury if he fails to grab this opportunity to build wealth.


(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)