50-30-20 Budget Formula: Everyone is working these days. Everyone earns something to support the family with their own expenses. But in addition to earning, it is also important to save money. But the salary of some people is so low that it becomes difficult to save money at the end of the month. But don’t worry, today we will give you information about a formula where you can easily save some money at the end of the month. Although there are many formulas for preparing a financial budget, the most popular among these formulas is the 50-30-20 formula.
What is the 50-30-20 formula?
In this formula, you divide your salary into three parts. The formula includes 50% for expenses, 30% for needs and 20% for savings. This formula helps in managing expenses along with savings. Apart from this, it also helps in achieving many financial goals.
How does this formula work?
Suppose 26 year old Priya lives in a PG in Delhi. She earns Rs 50,000 per month. Out of this, she sends Rs 10,000 every month to her parents. Now the question arises that how will she manage the savings with her expenses and needs with the help of this formula?
Priya gives Rs 10,000 from her salary to her parents every month. After this, her total salary is Rs 40,000. According to the 50-30-20 formula, Pooja will have to spend 50 percent of her monthly salary i.e. Rs 20,000. This expense includes PG rent, food, electricity bill etc.
Now divide the remaining 50% of the salary into two parts. Use 30% of the remaining salary i.e. Rs 12,000 for necessities. By necessities, we mean lifestyle, such as spending on gym or any workshop etc. You should try to save some amount from these necessities as well, which will help you in fulfilling your small goals like travel trip or buying expensive brand clothes and smartphone etc.
Now save the remaining 20 percent i.e. Rs 8,000. Along with your savings and investments, you should put some amount in the emergency fund every month which will help you financially in case of emergency. Apart from this, you should invest some amount so that you get returns which will help in increasing your savings. However, you should keep in mind that there should always be a balance in your savings account which will help in medical emergency.
In this way, you will be able to save as per your expenses and needs with the help of 50-30-20 formula.
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