How much of a Rp5 million salary should be saved? Here is how to divide it
Managing a monthly salary of Rp5 million requires planning so that daily needs are met without sacrificing savings. One important step is to set aside money at the beginning, rather than waiting for what remains at the end of the month.
The Financial Services Authority (OJK) emphasises the importance of determining income allocation according to financial goals and setting it aside from the outset. In one of its financial management guides, OJK provides a benchmark of at least 20 percent for investment and a maximum of 30 percent for debt instalments, while the remainder is used for daily needs.
There is no mandatory figure that applies to everyone because each person’s financial situation is different. However, setting aside 20 percent of salary can serve as an initial benchmark. If net income is Rp5 million per month, 20 percent is Rp1 million. Thus, a person earning Rp5 million can target savings or investment of around Rp1 million each month. If maintained consistently for one year without accounting for interest or investment returns, the accumulated funds would reach Rp12 million.
OJK also recommends the principle of setting aside rather than merely leaving leftover money, because funds that are not allocated from the start tend to be spent on various needs.
To make this easier, here is an example of an allocation that can be adjusted to individual circumstances: Rp1 million for savings or investment, which can be used to build an emergency fund, savings for specific goals, or investment according to risk profile and financial objectives. Rp2 million for essential needs, which can be used for food, transport, housing, electricity, mobile credit and other routine expenses. Rp1 million for needs and wants, which can be used for personal needs, entertainment, dining out or social activities. This amount can certainly be reduced if essential needs are higher. Rp1 million for instalments or other obligations. For those without debt, these funds can be redirected to increase savings, investment or other financial goals.
This allocation is not a rigid rule. OJK itself emphasises the importance of recording income and expenses and adjusting the budget to individual circumstances.
If you have instalments, how should you divide your salary? Instalments need to be a primary consideration before determining the amount of savings. In its guide, OJK provides a benchmark of a maximum of 30 percent of income for debt repayments. With a salary of Rp5 million, this limit is equivalent to around Rp1.5 million per month. However, this figure does not mean a person must take on instalments up to the maximum limit. The smaller the debt burden, the greater the room to save and meet other financial goals. For example, if instalments reach Rp1.5 million, daily needs are Rp2.5 million and savings are Rp1 million, the entire Rp5 million salary has been allocated.
What if expenses are greater than salary? If essential needs already consume most of the income, a savings target of 20 percent may feel burdensome. In such conditions, the savings amount can start from a smaller figure, for example Rp250,000 or Rp500,000. The most important thing is to build the habit of setting aside money regularly while evaluating expenses. OJK also emphasises the importance of distinguishing between needs and wants, recording income and expenses, and determining priorities so that cash flow remains healthy.
Several tips can help: set aside savings on payday by immediately transferring the predetermined portion to an account or instrument designated for financial goals; separate accounts for daily needs and savings to help prevent savings from being used; record expenses, as a simple record can show where money is most spent, and OJK notes that record-keeping helps understand one’s financial condition and make future financial projections; reduce unnecessary expenses, as small repeated expenses can reduce the ability to save, so evaluate subscriptions, dining out, impulsive shopping and entertainment spending; and do not save without a goal, as setting targets such as an emergency fund, buying a vehicle, education costs or a house can make saving habits more focused.
If you set aside Rp1 million each month, the estimated accumulation is: 3 months: Rp3 million; 6 months: Rp6 million; 1 year: Rp12 million; 2 years: Rp24 million; 3 years: Rp36 million. These figures are simple calculations and do not yet include savings interest, investment returns, administrative fees, taxes or changes in deposit amounts. OJK also recommends that financial goals be made specific and measurable, with progress monitored regularly.
A target of 20 percent, or around Rp1 million per month, can serve as an initial benchmark, but it is not a mandatory figure for everyone. If essential needs and instalments are still high, the savings amount can be adjusted. Conversely, if expenses are relatively low and there is not much debt, the savings or investment allocation can be increased. The key is to set aside money consistently after receiving salary, record expenses and adjust the budget to financial goals. In this way, a Rp5 million salary can still be managed for current needs while preparing for future needs.