Money Tips: If the 50-30-20 rule doesn't fit your income, then this financial rule will work wonders...

As difficult as earning money is, spending it effectively seems even more challenging. Most people are often found saying this at the end of the month, "I don't know where all the money went!" To overcome this problem, people plan their budgets. The 50-30-20 rule is often suggested for budgeting, but sometimes even this formula doesn't fit people's income. Another formula is the 70-20-10 Rule. It's quite practical and easy to use based on your income. It will help you cover all your expenses comfortably and keep you saving.

What is the 70-20-10 Rule?

70% Essential Expenses

Given today's lifestyle and inflation, managing expenses within 50% isn't everyone's cup of tea. Therefore, this rule allows you to spend 70% of your income on essential expenses. With this amount, you can manage rent, EMIs, groceries, electricity, gas, phone, children's needs, etc.

20% Savings and Investments
Saving just 20% of your income will be beneficial for your future. You can invest this amount. Now, the question arises: where to invest? Create an emergency fund from this amount. You can invest in a mutual fund through SIP. You can also choose options like PPF, FD/RD. If you are employed, you can increase your EPF contribution through VPF. Insurance is also an essential item, and you can pay the premiums from this amount. This portion is your Future Life Security Zone.

10% Lifestyle and Enjoyment
This portion is solely for you. You can fulfill your life's desires with this portion. Use this portion of your income to plan for movies, shopping, date nights, travel, etc.

Category Percentage Purpose
🔹 Necessary Expenses (Needs) 70% Housing, rent, groceries, electricity, water bills, children's fees
🔹 Savings/Investments (Savings/Investments) 20% FD, SIP, RD, Emergency Fund
🔹 Personal Expenses/Lifestyle (Wants) 10% Travel, shopping, entertainment

Example:
Let's say your salary is ₹100,000 per month. You can meet your needs with ₹70,000. You can withdraw ₹20,000 per month as savings and invest it in various schemes. The remaining ₹10,000 is for your personal use. You can spend it on any of your hobbies.

How to apply the 70-20-10 rule?
First, note your income.
Then make a list of expenses.
Keep a UPI/credit card tracker.
Set up a 20% auto-deduction every month.
Don't let lifestyle expenses exceed 10%.

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