The 50-30-20 rule is a good starting point for budgeting.
In general, one thing that is noticeable in many middle-class families nowadays is that when the paycheck arrives, the spending begins within a few days. When we have money, we spend it without considering what we are doing with it. We will then be forced to borrow. The majority of us do not budget. So today we’ll take a look at the 50/30/20 budgeting rule.
What is the 50-30-20 rule?
- 50% of your income should be allocated to your basic needs. Let’s say essential needs, housing, healthcare, education fees.
- 30% is a must and can be allocated for optional things like car, shopping, eating out at hotels, entertainment etc.
- 20% must be a savings or investment for the future
Keep in mind that everyone’s situation is unique. It’s fine if your spending doesn’t fit the 50-30-20 rule. However, if it is realistic for you, it may provide you with a good target to aim for.
So, if your monthly income was Rs 30,000 after tax, you might spend:
- Rs 15000 on Needs (House Rent / Loan, EB, Education, Vehicles , Bills, Grocery, Health, Education etc.
- Rs 10000 on Wants (Shopping, Eating Out, Cinema etc.)
- Rs 6000 on Savings
Minor changes can add up to big results over time. Putting a larger portion of your income into savings or debt repayment can help you feel more in control and capable of making more money.
Conclusion
This allows you to save for future projects. In such cases, a kid’s college ambition, or the construction or purchase of a home, can be beneficial.
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