The 50/30/20 Rule: Pranjal Kamra

Money is the most basic essential which is needed to survive on this planet. But oftentimes, it becomes a problem managing money. One of the main reasons this is the lack of preparing and following a budget.

Do you think that by just making a budget, you would be able to achieve your financial goals?

Follow this simple rule of budgeting:

The 50/30/20 Rule

The first 50% of your income goes into essentials like housing, transport, food, medical and term insurance.

These are the absolute basics. Now, when we say food, we mean basic food, preferably groceries and not Starbucks or Barbeque Nation.

Housing again means owning a 1 BHK, if you are newly married, or living on rent and nothing more.

For public transport, you should go with a basic bike / car. No frills.

The next 30% goes into lifestyle expenses!

This is where your Canon cameras, iPhones, funky sneakers, designer dresses or fancy gyms come into play.

The next 20% goes into meeting your goals.

This could be saving money. But saving alone would not yield you an adequate return. Therefore, you must choose to invest this amount in building a retirement corpus, making a housing down payment or your kid’s education.

So long as you can keep the above ratios reasonably in place, you will be in a good shape.

(The writer is CEO, Finology Ventures. Views expressed are personal)