Returning to India after a foreign stay as an NRI involves various changes in lifestyle, one of which is adapting to the economic scenario. One of the most crucial steps to help you settle in comfortably is creating a comprehensive budget through which you can appropriately budget your money. A budget that is well planned will not only protect your savings but also enable you to invest in your long-term financial objectives. In this blog, we will discuss five important areas to consider while making a budget for your life in India.
Evaluate Your Monthly Expenses
The first step in creating a budget is to know the cost of living in India. India might be more affordable than certain countries abroad, but lifestyle can make a significant difference. Allocate your monthly expenditure into categories that are essentials, such as:
- Housing: Rent or mortgage payments will likely be one of your largest expenditure. Research the cost of housing in your town, as it can greatly differ between a large city and small town.
- Utilities and Bills: Water, electricity, gas, and internet fees must be factored into your budget.
- Groceries and Everyday Essentials: Living costs can vary depending on how big your family is and the kind of lifestyle you have. Budget for groceries, household supplies, and personal care products.
- Transportation: If you own a vehicle, factor in fuel and maintenance costs. Public transportation or ride-hailing services like Uber or Ola are widely used in Indian cities as well. Understanding your essential expenses will help you make realistic savings and investment targets.
Prioritize Savings and Investments
After you understand what you spend, the next thing is to ensure that you’re prioritizing savings and investments. Apply the “50-30-20 rule” to create a balanced budget:
- 50% for Necessities: Spend 50% of your income on essential expenses like housing, food, and transportation.
- 30% for Personal Wants: Spend this percentage of your income on discretionary expenses like eating out, entertainment, and hobbies.
- 20% for Savings and Investments: The remaining 20% must be spent in building your savings and investments for the future. You could open a fixed deposit, invest in mutual funds, or opt for tax-saving options like Public Provident Fund (PPF) or National Pension System (NPS) to boost your wealth.
Miscellaneous Expenses Budget
Other than the monthly allowance, it is important to take into consideration expenses that are uncommon or occur every so often within a year. Such expenses are:
- Insurance Premiums: Life insurance premiums, medical insurance premiums, and car insurance premiums are generally remitted per year or semi-yearly; make sure to reserve money for these.
- Festivals and Special Occasions: Festivals, weddings, and the like in India can entail even massive expenditures. As a rule of thumb, provide special allowances for spending during these events in the budget.
- Travel and Holidays: If traveling within the country or overseas is in the pipeline, budget ahead of time so as not to upset the budget afterwards. Unforeseen expenses can be prevented and the budget maintained constant throughout the year round by budgeting for them.
Budget for Inflation and Currency Fluctuations
If you have foreign savings or income, look at the currency movement and how it might impact your budget. In the long term, exchange rates can shift in a way that would reduce your purchasing power if you were to convert foreign currency into Indian Rupees (INR). Also, India’s inflation rate could influence your cost of living.
- Protect Your Foreign Assets: Consider maintaining a portion of your wealth in foreign currency through an RFC (Resident Foreign Currency) account to hedge against currency risks.
- Adjust for Inflation: Keep an eye on inflation rates, particularly for essential expenses like food, fuel, and healthcare. Increase your budget accordingly to avoid falling short in the future. Planning for inflation and currency fluctuations will help ensure long-term financial stability.
Plan for Future Goals
Budgeting is not just about managing day-to-day expenses—it’s also about saving for your long-term goals. As a repeat NRI, you may have short-term and long-term goals, such as:
- Buying a Home: If you are likely to buy a home in India, start saving for a down payment and consider home loan products that suit your needs.
- Children’s Education: Education costs in India, especially for private schools and colleges, can be hefty. Start early by saving in child education plans or education-specific mutual funds.
- Retirement: If you haven’t already, now is the time to accelerate your retirement savings. Invest in pension plans, retirement mutual funds, and other long-term money products to secure your post-retirement life.
A balanced budget will help you to reach these milestones while maintaining your saving, spending, and investing in a balanced state.
Conclusion
Creating a budget for your life in India after returning from abroad is an important step towards a financially sound and expanding life. By determining your monthly spending, prioritizing savings and investments, planning for irregular spending, and considering inflation, you will be in a position to establish a sound financial foundation. Budgeting for long-term goals, e.g., buying a house or education for your child, will be comforting and take you to financial success in India.
FAQs
- How much of my income should I save?
Ans- Ideally, save 20% of your income in savings and investments. - How do I budget for unexpected expenses?
Ans- Set aside a portion of your monthly earnings for year-round expenses like insurance premiums, festivals, and holidays. - What are good investment ideas on coming back to India?
Ans- Think about PPF, NPS, mutual funds, and fixed deposits to augment your wealth. - How do I shield my foreign earnings from exchange rate risks?
Ans- You can deposit foreign currency in an RFC account and rule out exchange rate risks. - What is 50-30-20 budget rule?
Ans- The rule states that one can spend 50% of income on necessities, 30% on discretionary wants, and 20% on savings. - How do I make inflation adjustments in my budget?
Ans- Monitor inflation rates and increase your budget for necessities like groceries and utilities in proportion. - How do I plan for my child’s education in India?
Ans- You can invest in education-expenditure specific mutual funds or child education plans. - Is it a good decision to purchase a house in India?
Ans- Indian real estate can be a good investment, especially in emerging cities. - Should I keep foreign savings when I return to India?
Ans- Yes, you can keep some foreign currency savings through an RFC account for convenience. - What are the things that one must consider in setting up a budget?
Ans- The preparation of your budget must include all your monthly expenses, irregular expenditures, savings goals, and inflation.
Disclaimer: The information provided here is for educational and informational purposes only and should not be construed as financial, legal, or tax advice. Consult with a qualified professional before making any investment decisions. We do not accept any liability for errors or omissions in this information nor any direct, indirect, or consequential losses arising from its use.
