Money Tips: Running out of money every month? The 70/10/10/10 rule will change your fortune overnight..

The 70/10/10/10 formula is a simple and effective budgeting method that divides your total income into four equal parts to maintain proper control over expenses, savings, investments, and debt. According to this rule, 70% of your income is allocated to daily expenses, 10% to short-term savings, 10% to investments, and the remaining 10% to pay off debt. This formula helps you manage your salary smartly, ensuring you don't feel short on cash every month. So, let's learn how this 70/10/10/10 formula can keep your pockets full.

1. A Simple Rule That Can Completely Transform Your Financial Life

If you find budgeting a hassle, the 70/10/10/10 formula can simplify your tasks. Essentially, this rule divides your income into four parts: 70% for expenses, 10% for savings, 10% for investments, and 10% for debt repayment. This method can help you balance both today's expenses and future security.

2. What is the 70/10/10/10 formula?

This is a simple budgeting strategy, where income after taxes is divided as follows:
70%—For daily expenses
10%—For short-term savings
10%—For investments
10%—For debt repayment or donations

3. 70%—Manage your daily expenses wisely
This portion includes essential expenses like rent, groceries, electricity and water bills, insurance, and children's expenses.
Also, your comfort items—like OTT subscriptions—are included in this section.
If expenses exceed this 70% limit, track your expenses and cut back where unnecessary.

4. 10%—Build your safety net (emergency fund)
This portion creates a safe cushion for your needs, both large and small.
This can be used for emergencies, medical expenses, car repairs, or festive gifts.
It's best to auto-transfer this amount every month to ensure your savings don't falter.

5. 10%—Invest for the Future
This is where your money starts working for you, and you can invest in:

Mutual funds, ETFs, or stocks through SIPs
Government schemes like PPF, NPS, or ELSS
SSY for girls or ULIP plans for children
Indeed, even small amounts can grow over time through the power of compounding.

6. 10%—Pay Down Debt or Donate
Two methods are used to eliminate debt:

Avalanche Method: Pay off the highest-interest debts first
Snowball Method: Pay off the smallest debts first to maintain motivation
Once the debt is paid off, this 10% can be invested or donated to charity.

7. Learn how this formula works in real life
If your post-tax income is ₹100,000 per month:

₹70,000—daily expenses
₹10,000—short-term savings
₹10,000—investments
₹10,000—debt repayment
A simple, balanced formula that fits every income group

8. Why is this formula so effective?
This rule is very simple and requires little thought. It balances regular savings, investments, and spending. It reduces money stress and gives you better control over your financial life.

9. How to Make This Rule a Habit
Use apps like Money Manager, Wallet, and INDmoney to track your expenses.
Set up auto-deductions for savings and SIPs.
Make adjustments based on your financial needs each month.

Be flexible, as not every situation fits exactly into 70/10/10/10.

10. Start small, gradually reach the right balance.
You don't have to adopt the exact 70/10/10/10 ratio initially; you can adjust the percentages based on your circumstances and income.
As your income increases or your debt decreases, it will become easier to get closer to this formula.
Even small efforts can lead to financial freedom in the long run.

Top 5 FAQs on the 70/10/10/10 Formula

1. What is the 70/10/10/10 Formula?

This is a simple budgeting rule that divides your income into four parts: 70% for expenses, 10% for savings, 10% for investments, and 10% for debt repayment or charity.

2. Who should use this formula?

This formula is extremely useful for those who find themselves short of money before their monthly paycheck ends or want to organize their financial lives.

3. Can this formula be used by people of all income groups?

Yes, anyone with any income can use it. By adjusting the percentages slightly at first, you can gradually reach a 70/10/10/10 balance.

4. Does this formula work even if you have debt?

Absolutely. 10% of this is specifically set aside for debt repayment. Once the debt is paid off, this amount can be invested or donated.

5. Does this formula help in the long run?

Yes, this formula gradually builds a strong financial foundation, instilling the habit of regular savings and investments, leading to financial stability and independence in the future.

Disclaimer: This content has been sourced and edited from Dainik Jagran. 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.