Managing your money like the top 1% might sound complicated ,but it does not have to be .In this blog ,we can explain the 50/30/20 rule of money management ,
a straightforward and affective strategy that can help you take control of your finances.The rule breaks down your income into Four main categories :30 % for
Housing Expenses,30% for Necessary Expenses,30% for Financial goals and 10% Unnecessary Expenses .
30%:Housing Expenses
It is a first and most important of money management method. The 10 % of allocated Housing Expenses of your income such as mortgage,rental payment,property,
home owners,renters,insurance,maintennance cost.For Example
if you earn 1 lakh per month,then
you can allocated30,000 /-(Housing Expenses)
or
you can allocated 30,000/-(Necessary Expenses)
or 30,000/- (Financial Goals)
and
10,000/-(Unnecessary Expenses)
30%:Necessary Expenses
The 30% allocated to Necessary Expenses .This portion of your income should cover essential expenses such as rent or housing,food,trasportation,insurance,groceries,hea
lthcare,utilities or medical.By keeping track of these necessary costs,you can ensure that your basic needs are met without overspending.Budgeting for these
essentials helps you maintain a stable financial foundation ,which is crucial for long -term financial health.
For examples
if you earn 1 lakh per month,then
you can allocated30,000 /-(Housing Expenses)
or
you can allocated 30,000/-(Necessary Expenses)
or 30,000/- (Financial Goals)
and
10,000/-(Unnecessary Expenses)
30%:Financial Goals
The 30 % of allocated saving and investing of your income such as emergency fund,future expenses(sinking fund),retirement fund),education fund,marrige fun,short term fund or passive income.within this category ,its wise to set aside 3-5% as an emergency fund .This fund facts as a financial safety
net ,protecting you from unexpected expenses like medical emergencies or urgent home repair.The remaining portion of this 10% should be invest in reliable option
such as index funds,which offer a balanced and diversified approach to growing your wealth over time.smart investing can help you build a secure financial future
and achive your long term goals.For example
if you earn 1 lakh per month,then
you can allocated30,000 /-(Housing Expenses)
or
you can allocated 30,000/-(Necessary Expenses)
or 30,000/- (Financial Goals)
and
10,000/-(Unnecessary Expenses)
10%:Unnecessary Expenses
The 10% allocated to stress -free spending allow you to enjoy life without feeling guilty about your expenses.This Part of your budget can be used for activities that bring you
joy and relaxation ,such as entertainment,restaurant, shopping,gym,hobbies,vacation,clothing,housing/rent,food ,inurance,groceries, healthcare,utilities or medical.By setting
aside money specifically for leisure,you can including in your interest without compromising your financial stability.This balance between saving and spending is key to maintaining
a healthy and happy lifestyle.For example:-
if you earn 1 lakh per month,then
you can allocated30,000 /-(Housing Expenses)
or
you can allocated 30,000/-(Necessary Expenses)
or 30,000/- (Financial Goals)
and
10,000/-(Unnecessary Expenses).
FAQs About 30/30/30/10 Budeting Rule in India
What is the 30 30 30 rule for saving money?
If you earn ₹1,00,000 per month, you should not spend more than ₹30,000 on EMI or rent of a house. The other ₹30,000 is on grocery and personal needs. The remaining ₹30,000 will be on future goals, and the remaining ₹10,000 will be on luxury or wants.
What is the 30-30-30-10 rule for retirement planning?
The retirement saving 30:30:30:10 rule helps you invest income in an organized manner. It suggests investing 30% of savings into stocks, 30% in bonds, 30% towards real estate, and the remaining 10% in cash and cash equivalents. This gives birth to a balanced financial portfolio.
Conclusion
The 30-30-30-10 rule is a benchmark that helps you save a specific portion of your earnings each month. It is a percentage-based budgeting trick that sets a benchmark for expenses in different essential categories. Here are the details of how you can break down your earnings according to the 30-30-30-10 budgeting strategy