Is your expense getting out of hand? Couldn\u2019t drop any coin into savings and investment in the last few months? Well, all you need is a systematic approach towards your budget.<\/p>\n\n\n\n
Yes, a little discipline can totally vibe up your money game from next month onwards.<\/p>\n\n\n\n
So, what is that magic formula? It\u2019s called the 50-30-20 rule.<\/p>\n\n\n\n
Familiar with this rule? If not, no biggie. We are going to talk about it anyway. But, if you are already in the loop, you can skip the intro below.<\/p>\n\n\n\n
As you have already guessed, this 50-30-20 rule is all about simplifying your expenditure and savings plan, tailored to your income.<\/p>\n\n\n\n
Believe it or not, this decade old budgeting rule is a true OG! Yes, for nearly two decades this budgeting rule has been helping the money wizards slay their personal finance game and grow rich. There was a book named \u201cAll your worth: The ultimate lifetime money plan\u201d authored by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi which dropped this money wisdom bomb in 2005, making the finance game a piece of cake for literally everyone.<\/p>\n\n\n\n
Curious to dive into this 50-30-20 rule, huh? Let\u2019s not keep you hanging any longer.<\/p>\n\n\n\n
Here, the numbers- 50, 30 and 20 represent how much percentage of your paycheck you should be allocating for your needs (must-haves), wants (desires) and investment (or savings) respectively.<\/p>\n\n\n\n
Expenditure + Savings = Income<\/strong><\/p>\n\n\n\n (Needs + Wants) + Savings = Income<\/strong><\/p>\n\n\n\n | | | | <\/strong><\/p>\n\n\n\n 50% 30% 20% 100%<\/strong><\/p>\n\n\n\n Got it? Let\u2019s break it down a little more.<\/p>\n\n\n\n As per the 50-30-20 budgeting rule, stash 50% of the total income at lifestyle musts- covering housing rent, EMI, Grocery, daily commute\/ transportation cost, insurance, children\u2019s education\/ school fees etc. The monthly non-negotiables for the stress-free life you aspire.<\/p>\n\n\n\n Next, is the 30% allocation for wants or the fun fund. But, hold up… before we jump into spending this 30%, you must set aside a strict 20% of your income for savings and investment. How you decide to play with this 20%, that\u2019s your call- go for FD, RD, direct equity, mutual fund SIP or simply invest in Gold. No matter what you do, lock this 20% down every month for long-term compounding.<\/p>\n\n\n\n And now, the glorious 30% allocation of want fund. Consider this as a reward for nailing your monthly expenditure budget. The best part is- it\u2019s all you. It\u2019s your playground\u2014anything your heart desires, fits right into this 30%. So, travel adventure? movies, club nights, shopping sprees? Heck yes!! Go, make it epic.<\/p>\n\n\n\n Why not? This 50-30-20 rule is no one-size-fits-all. It\u2019s got your back factoring in several aspects such as your livelihood cost in a city, how your income stacks up against the minimum livelihood cost in your city and so on. After all, let\u2019s be real, when it comes to the 50% needs, you can\u2019t just increase or decrease your city life setting all of a sudden.<\/p>\n\n\n\n So, let\u2019s dig into the case studies.<\/p>\n\n\n\n Say, average salary in India is Rs. 50,000\/- and average cost of living in any (not too expensive) city of India is 30,000\/-.<\/p>\n\n\n\n If your income > average living cost in your city<\/strong>-\u00ad\u00ad\u00ad<\/p>\n\n\n\n follow the budgeting rule of Needs (50%) +Wants (30%) + Savings (20%) = Income<\/strong><\/p>\n\n\n\n Ex. (say, salary=50000\/-) 25000\/- 15000\/- 10000\/-<\/p>\n\n\n\n Now, if you are feeling a bit tight on the savings and investment side, you can cut down the want fund to 25% or 20% as per your need. But, don\u2019t touch the savings 20%.<\/p>\n\n\n\n If your income < average living cost in your city<\/strong>–<\/p>\n\n\n\n follow the budgeting rule of Needs (50%) +Wants (30%) + Savings (20%) = Income<\/strong><\/p>\n\n\n\n Ex. (say, salary=25000\/-) 12500\/- 7500\/- 5000\/-<\/p>\n\n\n\n Now, in this case, the living cost for the city where you are currently residing is way higher than your allocated lifestyle need budget, so, what to do? Dial down the want fund to 25%, 20% or even to 10%. Whatever floats your financial boat. After all, there is nothing more important than a comfortable life at present, then comes savings for your future. But, in such cases, try to rev up your income while maintaining a steady savings goal.<\/p>\n\n\n\n If your income > 3 X average living cost in your city <\/strong>-\u00ad\u00ad\u00ad<\/p>\n\n\n\n follow the budgeting rule of Needs (50%) +Wants (30%) + Savings (20%) = Income<\/strong><\/p>\n\n\n\n Ex. (say, salary is 100000\/-) 50000\/- 30000\/- 20000\/-<\/p>\n\n\n\n In this case, do you need 50,000\/- for your lifestyle needs? Your city\u2019s average livelihood cost is only 30,000\/-. Or, do you need 30,000\/- for your desires? Here, you can find a sweet spot between your budget and bliss.<\/p>\n\n\n\n If you dream of a luxe future lifestyle, it\u2019 time to shift gears and grow more money from your extra money. If your extra income is more than 2X the average livelihood cost, here’s your new game plan \u2013 the 20-30-50 budget allocation rule. If you settle your heart to this rule, your future self is gonna thank the present you!<\/p>\n\n\n\n We mean to say that toss the 20% of your extra income (the extra above 2 X average livelihood cost) to your needs leveling up the lifestyle standard to match your societal status, 30% of extra income into wants and rest of 50% of the extra income? Park it in the savings and investment fund.<\/p>\n\n\n\n Let\u2019s take an example.<\/p>\n\n\n\n Salary= 100000\/-, Average living cost in a city= 30000\/-<\/p>\n\n\n\n In such cases, let\u2019s break down the salary into 2 halves- 2X30000\/- and the rest.<\/p>\n\n\n\n 1st<\/sup> Round: Salary(1st<\/sup> part)= 60000\/-<\/p>\n\n\n\n Needs(50%)= 30000\/-<\/p>\n\n\n\n Wants(30%)=18000\/-<\/p>\n\n\n\n Savings(20%)=12000\/-<\/p>\n\n\n\n 2nd<\/sup> Round: Salary (2nd<\/sup> part)=40000\/-<\/p>\n\n\n\n Needs(20%)= 8000\/-<\/p>\n\n\n\n Wants(30%)=12000\/-<\/p>\n\n\n\n Savings(50%)=20000\/-<\/p>\n\n\n\n Total:<\/p>\n\n\n\n Needs= (30000+8000)\/-=38000\/-<\/strong><\/p>\n\n\n\n Wants= (18000+12000)\/-=30000\/-<\/strong><\/p>\n\n\n\n Savings=(12000+20000)\/-=32000\/-<\/strong><\/p>\n\n\n\n Now, we understand that as per your lifestyle choice, social status, size of the family, expensive livelihood cost in your city, etc. there can be more expenditure in the lifestyle need section. But, check it out, there\u2019s one super flexible thing- any idea what that is? This is the category game for this budget rule.<\/p>\n\n\n\n Only you can decide what are the must-haves or needs for your life, what are your desires and goals you are saving up for. So, categorize them in the needs, wants and savings section. After all, who knows your life better than you?<\/p>\n\n\n\n No matter what you do, don\u2019t forget about your future. Rock this 50-30-20 rule of budgeting if you don\u2019t want your future-self worry about money. <\/p>\n\n\n\n So, from next month onwards, lock in 20% of your income for savings and 30% for wants. This way, your lifestyle and monthly expenditure will always stay in a budget. If you are blessed with extra money, you know what to do.<\/p>\n\n\n\n Now, grab a notebook and see where your money is going.<\/p>\n\n\n\n For any doubt, leave a comment below.<\/p>\n\n\n\n Is your expense getting out of hand? Couldn\u2019t drop any coin into savings and investment in the last few months? Well, all you need is a systematic approach towards your budget. Yes, a little discipline can totally vibe up your money game from next month onwards. So, what is that magic formula? It\u2019s called the […]<\/p>\n","protected":false},"author":6,"featured_media":364,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1,12],"tags":[],"class_list":["post-133","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-budgeting"],"blocksy_meta":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/posts\/133","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/comments?post=133"}],"version-history":[{"count":5,"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/posts\/133\/revisions"}],"predecessor-version":[{"id":365,"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/posts\/133\/revisions\/365"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/media\/364"}],"wp:attachment":[{"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/media?parent=133"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/categories?post=133"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/easeinvest.in\/index.php\/wp-json\/wp\/v2\/tags?post=133"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Case study:<\/strong><\/h5>\n\n\n\n
Case 1:<\/strong><\/h6>\n\n\n\n
Case 2:<\/h6>\n\n\n\n
Case 3:<\/h6>\n\n\n\n
<\/h2>\n","protected":false},"excerpt":{"rendered":"