The 50-30-20 rule of savings to help in budget making

New Delhi| To achieve future financial goals, it is important for every person to make a budget according to his earnings. This shows how much of your earnings you spend and how much money you save. Savings also reveal your financial health. This requires understanding Rule 50-30-20 of Spending and Saving. According to the rule, every person should spend 50 percent of his earnings on essentials. 30 per cent should be spent on luxury or wishes. The 20 per cent share should be used for savings or debt servicing.

Understand like this…
Let’s say, your monthly earnings are 80,000 bucks. Divide it into three parts according to the 50-30-20 rule. Set aside 50 per cent, or Rs 40,000, for essential household expenses. Important expenses include monthly home loan installment, children’s school fees, grocery, health insurance etc., which cannot be ignored. Use a maximum of 30 per cent, or 24,000 rupees, for the fulfillment of desires or for luxury. These expenses include dining at a good restaurant and buying new gadgets etc. Monthly savings of 20 per cent of earnings, that is, Rs 16,000, must be made.

While investing your hard-earned money, choose your plans only after consulting experts. To deal with emergencies like epidemics, get health insurance, accident insurance etc. Take term insurance after you to ensure the safety of your family. Apart from this, definitely take a good pension plan, which will remove your financial worries in old age.

This rule can be considered a comprehensive guideline for better financial health. This rule is simple and quite challenging. This rule also shows that every person should save first and only then spend. This is especially beneficial for those who want to develop the habit of saving.-Balwant Jain Investment and Tax Advisor