Money Tips: Money runs out as soon as you get your salary? Follow this 40-30-20-10 'magical' rule..
If like others, your salary also ends within a few days of its arrival and you have to struggle with the shortage of money at the end of every month, then now is the time to make a budget wisely. Yes, for this, the magical rule of '40-30-20-10' is going to be very useful for you. This effective formula will strengthen your financial health and can get rid of the tension of money forever.
How to manage salary
Even after having a good salary, people often run out of money by the end of the month. This happens many times because proper money investment planning is not done. Yes, by making a smart budget, there is no shortage of money by the end of the month. So, to avoid a shortage of money, we will follow a smart formula of 40-30-20-10.
What does the 40-30-20-10 formula say?
The 40-30-20-10 formula recommends dividing the monthly salary (i.e. total monthly income) into four parts. The purpose of this formula is to ensure that along with fulfilling your needs, you also fulfill your hobbies, save for the future, and be prepared for sudden expenses.
40% - For needs
The biggest part of the salary, i.e. 40% should always be spent on your most important things. The expenses that come in 40% are those without which your work cannot be done. That is, you spend on house rent or home loan EMI, ration, electricity-water bill, children's school fees, and petrol or transport to and from the office.
30% - For your 'hobbies'
30% is considered the most important part. This part is for your lifestyle and entertainment. That is, you should spend 30% of your salary on those things which give you happiness. That is, spend 30% of your salary on eating out, watching movies, shopping, going out somewhere, etc.
20% - For 'savings and investment'
This is considered to be the most important part of securing your future. Yes, everyone should put 20% of their salary directly into savings or investments. This part should be invested as soon as the salary arrives. For investment, choose any option according to your choice like SIP, mutual fund, PPF, etc.
10% - 'Keep it in your pocket'
This can be considered to be the most unique part of this rule. Keep the remaining 10% of the remaining salary in your pocket. This part of the money will help in handling sudden expenses that come up in the difference of months.
Understand the whole math with an example.
Let's assume that if your monthly salary is ₹50,000 and you don't understand how to spend it properly and also save, then the 40-30-20-10 budget rule is best for you. According to this rule, spend ₹20,000 on your needs like rent, and ration, spend ₹15,000 on your desires, invest ₹10,000 in savings or investment and keep ₹5,000 for emergency or extra expenses.
Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
