Personal finance isn’t so much how much you make as it is how effectively you manage what you have. For working professionals in India, growing expenses, EMIs, and lifestyle expenses tend to leave very little for savings. An easy-to-use budgeting model called the 50/30/20 Rule can assist one in finding the right balance between needs, wants, and savings.
What is the 50/30/20 Rule?
50% – Needs: Necessary expenses like rent, grocery, EMIs, electricity, transport, insurance, and school fee.
30% – Wants: Non-essential yet desirable expenses like eating out, shopping, entertainment, holidays, gadgets, etc.
20% – Savings & Investments: Creating an emergency fund, SIPs in mutual funds, PPF, NPS, stock market, or retirement corpus.
This principle makes sure that each rupee earned is put to use and serves both current comfort and long-term security.
Consider the below example:
Assume your take-home salary per month is ₹1,00,000.
The 50/30/20 rule would be:
₹50,000 (Needs): Rent ₹25,000, grocery ₹10,000, EMIs ₹10,000, utility bills ₹5,000.
₹30,000 (Wants): Eating out, shopping, weekend outings, OTT plans, personal passions.
₹20,000 (Savings/Investments): SIP in equity mutual funds ₹12,000, PPF ₹5,000, emergency fund ₹3,000
This systematic method avoids overspending and ensures wealth accumulation.
Why This Works for Salaried Employees
1.Stable income – Salaried people receive a guaranteed monthly salary, which simplifies the use of disciplined budgeting.
2. Prevents lifestyle inflation – Increasing salary has a tendency to invite more discretionary expenditure.
3. Harmonious growth – Encourages enjoying today (30% desires) and saving for tomorrow (20% savings).
4. Adjustable – Can be adjusted (e.g., 60/20/20 or 40/30/30) based on spending objectives.
Drawbacks in India
Metro city high rents may absorb over 50% of income.
Home loan and car loan EMI-heavy lifestyle.
Lifestyle and peer pressure increase wants to over 30%.
Practical Solutions
If rent is eating into too much, cut wants to 20% temporarily.
Automate SIPs on payday so forced savings are guaranteed.
Keep a minimum of 6 months of expenses in liquid emergency fund.
Check budget every 6 months since income and expenses fluctuate.
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