A budgeting rule provides a clear picture of how your pay is being spent. Knowing this also guarantees that you may reduce all of your unused and unneeded expenses. You may start making concerted attempts to say goodbye to all those unanticipated pricey fine meals and online buying once you can visualise the inflows and outflows of your funds. You will wind up saving much more as a result of the approach.

One of the most well-known approaches to begin a sound money management journey is the 50/30/20 budgeting rule. How much money you make is unimportant. This guideline is simple to follow and will help you establish crucial financial discipline. Here’s how to get started:

Write down your total income first. Include all of them, whether they are from your full-time jobs, any side jobs, or short-term initiatives.

Let’s assume it comes down to INR 50,000.

Then, segregate this amount into three buckets of 50, 30, and 20.

50% Constitutes Your Needs

This comes to INR 25,000. You can fund all essential payments via this chunk.

30% Constitutes Your Wants

So, about INR 15,000. Let your hair down here! All your shopping, book collections, hobby classes, and solo trips can get a lease of life here. Think of this as your “Fun Fund”. The purpose of this fund is not just to survive but to thrive.

20% is Savings

INR 10,000—This should be devoted to your savings and investments. We are living through a pandemic in an era of expensive healthcare and job uncertainty. One visit to the hospital can drain you of all your funds. Hence, you must have enough stashed aside to ride over such times. Without a doubt, this is your most essential financial bucket.

What is a debt trap?

Debt accumulation has never been a good idea. However, there may be times when taking on debt is the only alternative. To manage unforeseen catastrophes or medical problems, one option is to take out a personal loan, student loan, or mortgage loan.

It’s better to refrain from opening up more credit lines in any circumstance. If this occurs, one must make sure they can make the loan payments on schedule. To avoid becoming caught in a debt trap, we must be careful not to overuse our credit limitations.