How much money do you need to be happy: what to do when you don’t have enough money to live on

Even economically literate people have difficulties with money. The bravest of them are not afraid to admit it honestly. And although it is difficult to catch by surprise those who are disciplined, know how to plan, do good math and regularly set aside part of their income for a rainy day, the personal experience that professional investors and bankers have gained during their difficult periods also benefits them. MK found out from professionals about how financiers behave on days when they lack money, what kind of salary Russians should receive so as not to think about making ends meet, and how to properly manage their income. Our questions were answered by: Alexander Razuvaev, member of the supervisory board of the Guild of Financial Analysts and Risk Managers; Andrey Vernikov, financial expert; Tatyana Bunegina, financial advisor and Maxim Osadchiy, head of the analytical department of BKF Bank.

– What do you do when you urgently need funds?

Razuvaev: “I try to be very smart about my spending, but when I don’t have enough money, I sell stocks and bonds. I don’t sell all the shares, of course, but those whose price has increased during the period that I held them, and the sale of which will be profitable compared to the purchase. I have a variety of securities in my portfolio, but I prefer to purchase shares from companies in the oil and gas sector and from those that regularly pay good dividends – for example, large banks. Sometimes I can withdraw money from the deposit, but now I do not advise Russians to do this, since at present there is a very good return on deposits in banks, and if you withdraw money before the expiration of your savings, you may not make a profit. In addition, I also have savings in precious metals, including gold and silver collectible coins, but I view these investments as long-term and prefer not to spend them.”

Vernikov: “I never make debts or take out loans. In this case, the person loses independence. He, for example, cannot leave a job he doesn’t like and is forced to put up with a tyrant boss. When there is not enough money, and this happens rarely, I turn to internal reserves. For example, I bought a certain number of ounces of gold on the Moscow Exchange. This is not for speculation, but for a period of five years or longer. If I really need money, I sell some of the gold, but I promise myself that I will soon replenish this supply. As for friends, often friends and money are incompatible things. If you borrow from friends, you can easily quarrel with them. It seems like they often can’t refuse, but even if you gave them everything, they will meet with you as little as possible so that you don’t ask for a loan again.”

Osadchy: “I only experienced a period when I didn’t have enough money once in my life – back in my student years. For the sake of total savings, I had to sharply limit my diet: at that time I lived only on fried potatoes. No problem, I did it. Everything improved dramatically as soon as I returned to work. I immediately began to form my own “safety cushion”. My classmate, whose parents could not help with money, worked as a janitor in the morning: he cleared snow. And I decided to devote myself to studying. So in such cases, everyone makes their own choice about what is more important to them and why.”

Bunegina: “I have a budget for regular monthly and weekly purchases, without which I cannot imagine my normal life, so I almost never find myself in a situation where there is not enough money. In addition, I have a financial “safety cushion” that allows me to cover unexpected expenses that I cannot do without. If the need arises for a large sum that is needed immediately, one option may be to sell shares or other investment assets.”

– How much should a Russian earn so that he has enough money to live?

Razuvaev: “In general, I advise all Russians to live within their means. I always try to stay within my budget. But how much of these funds someone needs is a matter of individual preference. There is an opinion that for a normal life in Moscow you need to have a monthly income of 200 thousand for a man and 100-150 thousand rubles for a woman. The difference is natural, since, according to Russian traditions, in our restaurants and other entertainment establishments only the man pays for a couple. Naturally, a person should have a “safety cushion”: who knows what will happen?

Vernikov: “How much a Russian should receive in order to have enough to live on is a very individual question. The habit of budget planning begins in childhood. I worked in one company where the salaries were very decent, but at the same time many employees lived from paycheck to paycheck, and money was stolen from colleagues in order to make it to payday. For such people, any salary will be small. In big cities, salaries are higher, but expenses are also higher, especially if there is a mortgage loan. There are obligatory expenses—mortgage payments, utility bills—and it’s difficult to manage them. You can save money on transportation costs, cosmetic expenses, going to the gym, and save on spending on clothes and mobile communications. Will life be fulfilling and happy under the motto of daily saving and cutting expenses? I don’t think so. The need to save money on gifts for children, for example, can easily make you depressed. Savings on training too. There is no future without new knowledge. If you have your own home and no loans, then a normal income in Moscow is 130-140 thousand rubles per person. As of December 1, 2023, the average salary in Moscow is 125,640 rubles, so it is realistic to receive this income: it is slightly higher than the average salary in the capital. In any case, there should be enough income to be able to save 15% for a rainy day.

Bunegina: “The question of how much a person should earn for a decent life always causes heated discussions. It cannot be answered unambiguously, since people have different living standards and needs. For one family, an amount of, for example, 600 thousand rubles will be sufficient, while for another this may not be enough even for one person.

According to Rosstat, the average per capita income in Russia in the third quarter of 2023 was about 50 thousand rubles per month. In my opinion, for a comfortable life, most Russians need at least 80 thousand rubles. This amount will not only cover daily expenses, but also invest in education, travel and other important aspects that are the norm in modern society. For a family of four, the total income should ideally reach 200-250 thousand rubles, which, unfortunately, is not so common. This highlights the problem of low incomes in the country.”

– What should you do to avoid getting into a difficult financial situation?

Razuvaev: “Currently, I advise everyone to take advantage of existing offers for depositors: bank rates are now very good. But there is another factor why deposits are better than bonds: we remember the end of February and March 2022 and the suspension of trading on the Moscow Exchange. Then investors could not use their funds, and you will always withdraw money from the deposit.

Naturally, the personal investment portfolio should be wider. It should also include blue chip stocks – companies that pay dividends well and on time – and gold or a selection of precious metals. If suddenly problems arise, you can always withdraw money from the account. Blue chip shares are more profitable to have in your personal savings portfolio, but a lot depends on their exchange rate on the Moscow Exchange, and it is influenced by many factors. Even if there is one positive on the market and in the economy, securities may decline in price if the market decides to take profits.

It was probably necessary to take out loans when during the coronavirus pandemic the key rate of the Central Bank of the Russian Federation was 4.25%. Now it is 16% and resorting to loans in such conditions means making your life very difficult and reducing its quality for years to come. If you take on loans, a situation may arise when you have to sell something valuable from your own resources in order to pay them off later. And today there are times when money is very much needed, but then I advise you to turn to wealthy friends, if you have them. Normal friends lend money without interest. True, you need to remember well the old saying about debts: “You take other people’s money for a while, but you give yours away forever.” And the responsibility for returning money to friends is very high, because if they urgently need funds, they will also need to quickly return what they borrowed.”

Osadchy: “The main advice is to avoid the debt abyss and, first of all, mortgages. Life, of course, is becoming more fun, but the incomes of most Russians are only growing statistically. When the growth of the debt burden turns out to be prohibitive, people are deprived of the opportunity to service their debts and are left without housing.

In the third quarter of 2023, over 70% of mortgages were issued to borrowers with a debt burden of more than 50%. They will spend more than half of their income on servicing their mortgage. And over 30% of loans go to borrowers with a debt burden of more than 100%. Basic advice: maintain your personal PDN (the debt burden indicator is the ratio of debt servicing expenses to income – “MK”) within 50%, and preferably 30%. If you have several loans, then try to consolidate, combine them and refinance at a lower rate, even if secured by property.

I also advise you to invest money not in fashionable gadgets, but in improving financial literacy. Look, Russians will stop falling into financial pyramids, and scammers from call centers will be left without work.”

Bunegina: “I am convinced that a personal budget needs to be managed and all expenses planned, avoiding constant random expenses. If a person often does not have enough money for ordinary needs, he should rethink his financial planning. First of all, figure out where the money is going. Perhaps a person lives beyond his means, making too ambitious purchases. It is necessary to put income and expenses in order, and this is impossible without increasing the level of financial literacy and drawing up a personal financial plan. It is important to realize that such management is not a way to solve short-term problems, but a long-term strategy for achieving financial stability and independence, taking into account your goals and desires.”