A Good Rule To Break Down Every Rs 100 In Your Budget Is 50:30:20. Find Out How

Posted: July 1, 2018

How do you make a good, sustainable budget? Fisdom’s Subramanya SV tells you about the best way to do that, in a 5-step process.

Have you heard of these numbers 50-30-20? It is a popular rule for breaking down your budget. 50 percent of your income goes for necessities, 30 percent to savings and 20 percent to indulgence.

But this is not a rigid ratio to follow strictly. It is wise to tweak this to your needs. Financial independence begins when a woman can make her own informed financial decisions.

Here is a five step process to financial planning and independence.

  1. Get over the notion of outsourcing your financial decisions to someone else. Take charge.
  2. Track your expenses. You could do this with traditional pen and paper, or use a simple excel sheet, or even simply note it down in your phone and tally it periodically.
  3. Make a spending plan. 50:30:20 is a popular rule. See how much money is needed to cover your basic necessities. Adjust your savings and indulgences accordingly. Stick to your indulgence limit and do not let it overflow and affect the savings.
  4. Build a six month reserve fund, if it is not already in place. Keep it liquid and hassle free. Something as simple as stepping into a bank and walking out with cash. This would be your fall back fund if there are any untoward situations.
  5. Make a financial plan for long term. Identify long term needs like Education, Marriage, Retirement and allocate funds accordingly. Take help from a financial advisor if needed.

Watch this episode of The Prathibha Sastry Show to listen to Subramanya SV, co-founder of Fisdom talk about  this in detail and more.

Image source: YouTube

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