Here’s how you can achieve your financial goals using 50/30/20 rule

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Money is the most basic essential which is needed to survive on this planet. But often, managing the money becomes a problem.

One of the main reasons for such a situation is the lack of following a budget. But do you really think that by just making a budget, you would be able to achieve your financial goals?

Do you know what saving money and weight management have that one thing in common?

Yes, it’s the record-keeping part of it. Do you keep thinking of the painful paperwork or data entry on the computer? Then let’s follow this simple rule of budgeting.

Let’s call it a 50/30/20 rule:

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

These are the absolute basics. Now, when we say food, we mean very basic food, preferably groceries and fuel 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 investing for building a retirement corpus, making a housing down payment or your kid’s education,

As long as you can keep the above ratios reasonably close to what you are doing, you will be in fine shape.

But once you grow up to a certain age then you realize the need for savings and with that, the need term insurance, medical insurance for parents, etc. So, you must start allocating in different ratios till you attain 50 years of age.

(The writer is founder & CEO, Finology Ventures Pvt Ltd. Views expressed are personal)