How Much Money Do You Need to Move Back To India?

Let’s face it. The biggest reason we all went to the US is for the $$$. That is what kept us there and I’m sure it is one of the biggest reasons for keeping most of you there. But, in our quest for more and more, we sometimes tend to forget what is truly important. Does the Tesla give you more pleasure than the Maruti 800 drive you had with your parents in your childhood? Is your million-dollar single-family home truly making you happy when you don’t have your parents with you?

Okay okay, enough broad strokes questions that cannot (and should not) be answered in isolation. My point is that you should still ask yourself some of these questions and review your financial situation from time to time. How much money is enough to return to India? How much money to save to retire in India? Do I have enough money to go back to India? Will $1M in savings be enough to move back to India? These are the most common questions that get asked in multiple forums and as always there is one right number that works for everyone. I will still attempt to come up with an approximate range that might help you put things into perspective and may work for the majority of you.

Why are higher savings so important to move back to India?

I always believed that saving decent money in the USA and then returning to India increases your chances of a successful move back to India. It is obvious that more money is better but this is especially true in a country like India. Speaking from personal experience, having that cushion of a good corpus has helped us take many risks and decisions that we might not have taken had it not been for our financial situation. Sometimes we make certain emotional decisions disregarding the realities of life. There are a few reasons why you should try to maximise your net worth while you are outside India.

Cost of Living in India

Depending on where you choose to live in India, expenses can be extremely high. To replicate the same lifestyle you have in the USA in India, you will require a good amount of savings. Rents, property prices and education expenses are disproportionately higher in India compared to salaries (although everything else is considerably cheaper). Since you have an opportunity to maximise your savings in a short amount of time, you should minimise the impact of these factors by saving enough. More on what is “enough” below.

Increased ability to take risks

Living in India with a decent corpus saved up gives you the freedom to try out new things without the fear of losing your visa status or waiting many years in the green card queue. Let’s say you want to explore startups after coming back. Income from a new source takes time and your saved corpus will give you the necessary courage and time to give it your all. I worked at a startup after moving back to India and am currently exploring teaching and freelancing.

Inefficiencies in India

What does this even mean? This is something that we did not plan on and we realised is unique to life in India. After moving back, many a time we found ourselves in positions where we were trying to optimise our money spent. For example, while furnishing our home we wanted to get the best price for many of the items. Being the data-oriented person that I am and having heard horror stories about India, I always had my guard up and spent so much time and energy just to make sure we didn’t get cheated. Over time, I made peace with the fact that things in India work very differently. No matter how hard you try, there will come a point where your efforts will start yielding diminishing returns. My wife and I have now mentally prepared an “inefficiency fund” where we are okay spending a certain amount that we would not have ideally spent. This amount is for all the inefficiencies that come with living in India that would not be a problem outside. What this means is that you can save yourself a lot of heartache and headaches by spending 10-20% more than you ideally would have. Having been a frugal person all my life, this was a big mindset shift for me but I have been much happier since I made this switch. The higher the savings you have, the more of the day-to-day problems in India disappear.

How much money do you need to move back to India?

Now that we know that a good corpus is important, let’s talk about how you can estimate what the right amount is. There are a few factors on which this depends. Let’s walk through each of these in detail.

Housing

This is the biggest expense of all irrespective of whether you live on rent or have your accommodation. If you do have a place you own already or do not anticipate buying a new one completely on your own, your net worth requirements come down significantly. We did not have primary housing and always had plans to buy one in Mumbai. It took us a couple of years to find the right one but we finally managed to buy one two years after moving back to India from the USA. If you do need one, plan to save enough to buy one in full or with minimal loan. Housing loan interests are high and primary houses should not be considered assets. Of course, whether to buy or rent is a completely different topic – I have gone back and forth many times on this. If you go purely with numbers, you will likely come ahead renting. But for all the monetary benefits renting offers, there are some intangible benefits of owning a house to stay that cannot be quantified. Depending on the city you move to and how much you want to splurge on housing, you should budget anywhere between 1.5-4 crore for a 2BHK or a 3BHK in most tier 1 cities. If you plan to rent, you can budget around 40k-80k/month for a good home in a nice locality with decent amenities.

Living Expenses

I have had many people ask me what my monthly expenses look like in India. There is good information on cost-of-living calculators and several other forums which give a general sense of expenses. Below is a detailed breakdown of our expenses in Mumbai. The first section outlines the recurring monthly expenses and the second section shows the one-time yearly expenses converted into a monthly number.

1. Recurring Monthly Expenses

2. One time yearly expenses

Adding both of these buckets together roughly translates to 80k-1L/month (excluding housing but including kid’s schooling). In my mind, this is an extremely comfortable lifestyle and towards the upper end of our average monthly expenses. Of course, there is no end to how much you can spend and I would not call this a lavish lifestyle. But, this number probably mirrors an upper-middle class lifestyle in a tier 1 city.

Dependents & Health Conditions

Some of you might have financially independent parents with pensions or significant retirement funds. Many of us have parents who require our support financially. Most of these costs would be related to healthcare. If you or your parents suffer from a health condition, you should factor in the cost of healthcare in your financial calculations. Healthcare in India can range from affordable to prohibitively expensive. Most of your medicines and doctor visits will not be covered by insurance although on average you will most likely spend less on healthcare in India. Break such expenses down into a monthly number.

Career

Decide what kind of work-life you want to have in India – whether you want to take up a job, take a break or try something of your own. If you are married, one of you might want to take a break for childcare, start your own business or just because you are feeling too burnt out to return to the corporate world. If you are planning to take up a job after moving back to India, know that salaries in India have increased considerably in the last few years, especially in the software industry with the salary differential with the USA shrinking. But, if you do not want to take up a job immediately, you should plan how many years you want to give yourself a break or to try something new. Based on this, your money requirements will increase.

Calculating The Magic Number

Now that we have established the importance of a corpus and which factors go into determining one, let’s come up with some rough numbers.

1. If you still need to get primary accommodation sorted in India, your monthly expenses in a Tier 1 city will likely average around 80k-1L/month for an average-sized family. 
2. If you plan to buy a home in a tier 1 city, you can budget separately for that amount (2-4 crores). If you plan to rent, you can add another 50k/month to the expenses.
3. Budget for career breaks or pursuing a business. If you think you need 5 years to set it up, budget accordingly based on monthly expenses.
4. If you do not plan to work after coming back to India, you should look up FIRE (Financial Independence & Retire Early) calculations. Most early retirement calculators assume the corpus requirements to be 30x-50x your annual expenses based on your age, risk threshold and your desire/ability to make income back home (where x is your annual expenses). For example, if your total monthly expenses are 1L/month, you will need roughly 4 crore (which roughly translates to 33x your expenses) to consider retiring.

The same number does not work for everyone since everyone’s financial situation, expectations, lifestyle and investment philosophies are different. If I had to come up with a net worth number to make this move successful, I would put it between 3 crore and 7 crore depending on whether you have your own house in India and how long you plan to work after moving back to India – assuming that you want to live a decently comfortable lifestyle. If you want to continue working fully and don’t have any plans to slow down, you should at the very least plan for a paid-off home in India. Yes, renting will always come out ahead mathematically (in fact I used to prefer renting to buying when I was making this decision) but in my opinion, the mental peace of a mortgage-free home is tough to match.

Of course, these numbers are very broad generalisations and coming up with an exact number needs to be a more detailed exercise. Some of you might want to retire, whereas some of you cannot stand the thought of not doing anything. Some people own a home, some might need to buy one and some might prefer renting forever. There is no one-size-fits-all number. But I do believe that having a general ballpark number or a range helps immensely in setting a goal and putting our minds at ease. Think of this number as a no-regrets number that ensures some level of safety. Yes, you may or may not be able to retire with this much. Yes, you might have to still generate an income if needed. But having this much will at the very least guarantee a good lifestyle for most of you even if things in India don’t go exactly as per plan.

We often look to others to validate our corpus numbers and whether it is enough. I have read countless threads and posts on social media to come up with this number. I have also had phases where I used to track my net worth every day and continued to obsess over whether we had enough to make this decision. Over time, I have realised that after a point these will just be numbers on a spreadsheet. My advice would be to not overthink this after reaching a number close to this range. There is no end to this and you will always feel the need for another crore, to send your kid to the best international school, to take one extra vacation per year. You will reach a stage where your quest for more money will start interfering with other equally important factors (kid’s age, family, your ability to adjust to India again). You might then surpass the ideal age to move back and will find it difficult to make this decision after a certain age. If money is the only thing holding you back, at some point, you will have to go with your gut feeling, weigh the pros and cons, have some confidence in your abilities to generate an income if necessary and just make the move.