How much Income is "Sufficient Income"?

Arjuna (Fictional Character): Krishna, We began our financial journey last week where we discussed the various steps involved in achieving financial goals. The first step in the process is earning a steady income. However, a lot of readers are still pondering the question as to how much income is enough. Please enlighten readers on the same.

Krishna (Fictional Character): Arjuna, In this series of "Arthneeti", we will discuss about sufficiency of Income. There is a saying which goes as "Money cannot buy Happiness" but we should know the things that gives us Happiness can be bought by Money. Hence, determination of sufficient level of income is very important for oneself, as it not only forms the basis for one's financial decisions but also helps the individual reflect on whether he need to take extra efforts, focus on immediate skill development or look for other job opportunities fulfilling his financial goals.

Arjuna (Fictional Character): Krishna, How to determine the individual level of sufficient income?

Krishna (Fictional Character): Arjuna, Statistically speaking, the per capita income of Indian is Rs 1,72,276/- per annum for the FY 2022-23. So if a person is earning more than the per capita income, he can be assured that he is earning more than average individual in the country.

Arjuna (Fictional Character): Krishna, So if a person is earning more than per capita income, can he said to be earning sufficient income?

Krishna (Fictional Character): Arjuna, Level of sufficiency has the following stages:

1. One should first look at the national per capita income and shall ensure that they are earning more than that.
2. Once satisfying himself with the national comparison he shall further compare his income with average income of his State. As per the report of Directorate of Economics and Statistics, Planning Department, the Per Capita Income of Maharashtra State for the FY 2021-22 was at Rs. 2,15,233/-
3. Next Step would be comparing your income with per capita income of your city. The estimated per capita income of Mumbai was at Rs. 3,44,394, Pune at Rs. 2,85,409 and Chh. Sambhajinagar at Rs. 1,80,373 for the FY 2021-22.
4. And finally then you should compare your income with that of your peers, including professionals in the same industry, colleagues at a similar career level, or individuals at a comparable stage in life. One can determine a income multiplier based on the income earned by peers and average income of the city or state. This shall include various factors such as your age, family members, etc. Once such income multiplier is set you can easily identify your sufficient level of income. For example, your peers earn around Rs. 12 Lakhs per annum in Mumbai, which is around 3.5 times the average income (per capita) earned in the city, you shall now consider the other obligations required to be fulfilled by you when compared to them and adjust the multiplier accordingly.

Going through these 4 stages, it will help you in evaluating your professional growth, understanding industry standards, and planning for future financial goals. However, it's crucial to approach this comparison with a healthy perspective, recognizing that everyone's journey is unique and that income is just one aspect of a fulfilling career and life.

Also an important point to note is that, your Annual Income should increase 2x the annual inflation rate. Example- If inflation rate is at 5%, then your income should grow by atleast 10%. 

Arjuna (Fictional Character): Krishna, what should one learn from this?

Krishna (Fictional Character): Arjuna, The question of how much income will be enough, is not as simple to answer as it sounds. No amount can be used as a yardstick for everyone to consider the sufficiency of income. Sufficiency depends on the expectations of the individual, their lifestyles, wants and priorities. "What might be useless for someone could be a dream for some other".  The people who have earned fortune in their life, have always said that "After a certain point of time, money does not remain a priority, but to have time to spend that money with your loved one's becomes the priority".