Business News Desk – A big problem with every employed person is that he waits for the salary to come the whole month. Whereas when the salary comes, it goes away within some time, no one knows. In such a situation, many people are unable to invest due to inability to save money. In such a situation, there is a need to make a special budget of every month’s salary and spend it accordingly. To make a monthly budget, you can take the help of 50-30-20 rule, which will improve your financial planning.
What is the 50-30-20 rule?
The 50-30-20 rule was introduced by Elizabeth Warren, a member of the US Senate and one of Time Magazine’s 100 most influential people. He wrote about it in 2006 in his book with his daughter, All Your Worth: The Ultimate Lifetime Money Plan. Under this, he divided his salary into three parts – need, desire and savings.
spend 50% here
According to Elizabeth Warren, we should spend 50% of our income on things that are important to us and that we cannot live without. This includes things like house ration, rent, electricity bill, children’s education, EMI and health insurance.
understand the second part of the rule
The second part of this rule is 30%, which should be spent on your desires. These are expenses that can be avoided, but spending money on them makes people happy. These include watching movies, going to parlor, shopping, eating out or fulfilling one’s hobbies.
what is the third and last part
Its third and last part is 20%, which should be kept for savings according to this rule. This money should be used for planning your retirement, children’s higher education, children’s marriage and emergency fund.
Understand this rule with an example
Suppose your monthly income is Rs 50 thousand. In such a situation, according to the 50-30-20 rule, you should spend 50 percent i.e. 25 thousand rupees on household needs. This will include essential expenses like house rent, ration, electricity-water bill, child fees, car petrol.
understand the second part also
At the same time, you can spend 30 percent of it i.e. Rs 15 thousand on your wishes. These desires include travelling, watching movies, shopping for clothes, buying mobile-TV or other gadgets etc.
