Who doesn’t want to work? There are many people who love to spend money, and there are many who like to save money. If you are also willing to save money, keep an eye on today’s report. We will help you become financially empowered and prepare the right budget. Although there are many formulas for budgeting financially, the most popular of 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 consists of 50 per cent of the expenditure, 30 per cent of the need and 20 per cent of the savings. This formula also helps in managing expenses with savings. Apart from this, it also helps in fulfilling many financial goals.
How does the 50-30-20 Formula work?
Suppose 28-year-old Roshni lives in PG, Delhi. She earns Rs 50,000 a month. She sends Rs 10,000 every month to her parents. Now the question comes how she will save with her expenses and necessities with the help of this formula. Rishni pays 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, Roshni will get 50 per cent of her monthly salary i.e. Rs 20,000. This expenditure includes PG rent, food, electricity bill etc.
Now divide the remaining 50 percent of the salary into two parts. Use 30 percent of the remaining salary i.e. Rs 12,000 for the need. By need, we mean lifestyle such as spending on a gym or a workshop, etc. You should try to save some amount from these necessities as well, which will help in fulfilling your small goals such as travel trips or any expensive brand of clothes and smartphones, etc.
Now save the remaining 20 percent i.e. Rs 8,000. Along with your savings and investments, you should put some amount every month in an emergency fund that will help you financially in case of an emergency. Apart from this, you should invest some amount so that you get returns that will help in increasing your savings. However, you should keep in mind that there is always a balance in your savings account which helps in medical emergencies. In this way, you will be able to save with your expenses and needs with the help of the 50-30-20 formula.
