Elearnmarkets - Financial Market Learning
  • Categories
    • Basic Finance
    • Derivatives
    • Financial Planning
    • Fundamental Analysis
    • Technical Analysis
    • Marketshala
    • Miscellaneous
  • Language
    • English
    • Hindi
    • Bengali
No Result
View All Result
  • Courses
  • Webinars
  • Learn On Elearnmarkets
Elearnmarkets - Learn Stock Market, trading, investing for Free
  • Categories
    • Basic Finance
    • Derivatives
    • Financial Planning
    • Fundamental Analysis
    • Technical Analysis
    • Marketshala
    • Miscellaneous
  • Language
    • English
    • Hindi
    • Bengali
No Result
View All Result
  • Courses
  • Webinars
  • Learn On Elearnmarkets
Elearnmarkets - Learn Stock Market, trading, investing for Free
No Result
View All Result
Home Financial Planning
Follow 50/30/20 Rule - A perfect way to start Savings 1

Follow 50/30/20 Rule – A perfect way to start Savings

Elearnmarkets by Elearnmarkets
September 5, 2022
in Financial Planning
Reading Time: 8 mins read
0
1.6k
VIEWS
Share on FacebookShare on TwitterShare on WhatsApp

Listen to this :

Hindi: आप इस लेख को हिंदी में भी पढ़ सकते है|

The importance of maintaining a personal budget cannot be overstated.

It is the best way to allocate our funds towards our expenses, obligations and most importantly, savings.

Table of Contents
What is the 50/30/20 Rule?
Needs and Wants
Why Should You Understand the Difference Between Your Needs and Wants?
How to Implement the 50/30/20 Rule?
  • Estimate your total income and expenses
  • Identify your needs and wants
  • Allocate funds for your savings

Despite all this, when it comes to budgeting, we are faced with a very tough question.

Join TMP Join TMP Join TMP

How do we start with this process in the first place?

It is in situations like these that we look for a rule of thumb, and the most popular one in this case is the 50/30/20 rule.

What is the 50/30/20 Rule ?

This rule states that we must allocate –

  • 50% towards our needs;

  • 30% towards our wants; and

  • 20% towards our savings.

For example, if your total income is Rs. 10,000, allocate –

Manage your finances with Personal Finance for Beginners course by Market Experts

  • Rs. 5,000 towards your needs;

  • Rs. 3,000 for your wants; and

  • Rs. 2,000 towards your savings.

Needs and Wants:

To understand this rule any further, we first need to understand what are needs and wants.

Simply put, a need is something you cannot survive without.

Examples of needs include –

  • The rent for your house;

  • The food you eat; and

  • The loan repayments you have to make, etc..

Why is doing your loan repayment a need?

This is so because if you don’t put aside enough money for it, you may be penalized for late payment.

This will just add to your problems, and therefore, you need to make your loan repayment.

On the other hand, a want is something you don’t need, but simply desire.

Examples of wants include –

  • Eating out in restaurants;

  • Going out for movies;

  • Clubbing, etc..

Why Should You Understand the Difference Between Your Needs and Wants?

As we can see from the definition of the rule, 50% of your income will be allocated towards needs.

Now, suppose you habitually eat out thrice a month, and you have been doing this for three years.

When you sit down to make a budget, you might think that, since you have been eating out in this manner for so long, setting money aside for this is needed.

Therefore, will eating out be a part of your needs?

No. This is because eating out is not crucial to your survival, and therefore, it is not a need.

You first need to provide for the obligations you have towards your survival before you can provide for your wants.

Hence, for this rule to work for you, it is important for you to prioritize and act on your needs before your wants, always.

Now that we have discussed this, let us break down the 50/30/20 rule, step-by-step.

How to Implement the 50/30/20 Rule?

The steps to follow this rule are quite simple.

50/30/20 rule implementation

1. Estimate your total income and expenses.

To allocate your funds, you have to know how much funds you have.

Firstly, you should track all your sources of income.

You can earn income in the form of salary, along with some additional incomes in the form of rent, dividends, etc..

Following this, you must track your expenses, and understand which of these are –

  • Fixed (you need to make these payments); or

  • Variable (these may vary for every transaction).

2. Identify your needs and wants.

We have already discussed needs and wants and how to distinguish between them.

You will now put that knowledge into action and decide upon which of your transactions are your needs and wants accordingly.

After doing so, you should now set aside 50% of your funds for your needs, and 30% for your wants.

3. Allocate funds for your savings.

As we arrive to the last step, allocate the remaining money towards your savings.

Why should you set this money aside if you’re not using it at all? Why not spend it all?

This is because we never know what problems we might face in the future, and some extra money is always helpful in such cases.

You can also take help of Kredent Money App to allocate your funds for your savings

From medical emergencies to retirement planning, savings are the lifeline that can prevent us from being completely helpless when we face financial difficulties.

With the various financial products available to us today, we can make our savings generate more money for us as well. How?

We can put this money in –

  • A savings account; or

  • A recurring deposit; or

  • An investment in the stock market.

We can even use this money to create a separate fund for emergencies of any kind as well.

Learn how to invest your salary for Financial Independence –

The 50/30/20 rule is a popular thumb-rule that seems logical and is quite easy to follow as well.

One thing that you should always remember is, that it is not necessary that a rule which works for everyone else, works for you in the same way as well.

We all have different incomes, needs, wants and expenses, and this rule is merely a simple way of allocating funds.

Once you start budgeting, you will start to understand which type of allocation works for your financial profile accordingly.

Happy Learning!

Tags: basicBudgetfinancial planninginvestinginvestment in financial markets
Share5TweetSend
Previous Post

Durga Puja: Snapshot of Economy this festive season!

Next Post

Understanding the Inverted yield curve

Elearnmarkets

Elearnmarkets

Elearnmarkets (ELM) is a complete financial market portal where the market experts have taken the onus to spread financial education. ELM constantly experiments with new education methodologies and technologies to make financial education effective, affordable and accessible to all. You can connect with us on Twitter @elearnmarkets.

Related Posts

Financial Calendar 2023-2024 - Remember these Important Dates for Tax Planning, Advance Tax Payment, and Investments! 2
Financial Planning

Financial Calendar 2023-2024 – Remember these Important Dates for Tax Planning, Advance Tax Payment, and Investments!

April 12, 2023
1.2k
correlation
Financial Planning

Understanding the Effect of Correlation on Portfolio Diversification

October 13, 2022
3k
7 Smart Strategies for Managing your Finances this Festive Season 3
Financial Planning

7 Smart Strategies for Managing your Finances this Festive Season

October 13, 2022
1.6k
8 Strategies to Reduce Investment Risks 4
Financial Planning

8 Strategies to Reduce Investment Risks

September 22, 2022
19.5k

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Follow Us

Facebook-f Twitter Instagram Linkedin-in Youtube Telegram

Register on Elearnmarkets

Continue your financial learning by creating your own account on Elearnmarkets.com

Register Free Account

Download App

Categories

  • Basic Finance
  • Derivatives
  • Financial Planning
  • Fundamental Analysis
  • Technical Analysis
  • Marketshala
  • Miscellaneous

Popular On Elearnmarkets

  • Market Superheroes:
  • Vivek Bajaj
  • Chetan Panchamia
  • Ashish Kyal
  • Premal Parekh
  • Abhijit Paul
  • Jegan
  • Sivakumar Jayachadran
  • Vishal Malkan
  • Jyoti Budhia
  • Vivek Gadodia
  • Vishal Mehta
  • Piyush Chaudhry
  • Santosh Pasi
  • Gomathi Shankar
  • Market Superheroes:
  • Vivek Bajaj
  • Chetan Panchamia
  • Ashish Kyal
  • Premal Parekh
  • Abhijit Paul
  • Jegan
  • Sivakumar Jayachadran
  • Vishal Malkan
  • Jyoti Budhia
  • Vivek Gadodia
  • Vishal Mehta
  • Piyush Chaudhry
  • Santosh Pasi
  • Gomathi Shankar
  • Courses:​
  • Options Trading
  • Dow Theory
  • Momentum Trading
  • Stock Investing
  • Stock Market for Beginners
  • Harmonic Chart Patterns
  • Algo Trading
  • Elliot Wave Theory
  • Advanced Excel
  • Cryptocurrency
  • NSE Certification Course
  • Courses:​
  • Options Trading
  • Dow Theory
  • Momentum Trading
  • Stock Investing
  • Stock Market for Beginners
  • Harmonic Chart Patterns
  • Algo Trading
  • Elliot Wave Theory
  • Advanced Excel
  • Cryptocurrency
  • NSE Certification Course
  • Webinars:
  • Bank Nifty Scalping
  • Intraday Trading Strategies
  • Options Trading Strategies
  • Options selling
  • Price Action
  • Relative Strength
  • Tax Planning
  • Options Buying
  • Growth Stocks
  • Portfolio Management
  • Relative Strength Index
  • Risk Management
  • Renko Charts
  • Crude Oil
  • Traders Psychology
  • Moving Average
  • Multibagger Stocks
  • Webinars:
  • Bank Nifty Scalping
  • Intraday Trading Strategies
  • Options Trading Strategies
  • Options selling
  • Price Action
  • Relative Strength
  • Tax Planning
  • Options Buying
  • Growth Stocks
  • Portfolio Management
  • Relative Strength Index
  • Risk Management
  • Renko Charts
  • Crude Oil
  • Traders Psychology
  • Moving Average
  • Multibagger Stocks
  • Free Learning Modules:
  • Intraday Trading
  • Options Scalping
  • Swing Trading
  • Financial Modelling
  • RSI Indicator
  • Bollinger Bands
  • Pricing of Futures
  • Personal Finance
  • Initial Public Offerings (IPO)
  • Value Investing
  • Technical Indicators
  • Candlesticks
  • Chart Patterns
  • Option Greeks
  • ELSS Funds
  • Banking and Insurance
  • Real Estate
  • Gold
  • Free Learning Modules:
  • Intraday Trading
  • Options Scalping
  • Swing Trading
  • Financial Modelling
  • RSI Indicator
  • Bollinger Bands
  • Pricing of Futures
  • Personal Finance
  • Initial Public Offerings (IPO)
  • Value Investing
  • Technical Indicators
  • Candlesticks
  • Chart Patterns
  • Option Greeks
  • ELSS Funds
  • Banking and Insurance
  • Real Estate
  • Gold
  • Book Summaries:
  • Rich Dad Poor Dad
  • Psychology of Money
  • The Intelligent Investor
  • The Richest Man in Babylon
  • Think and Trade Like a Champion
  • Value Investing and Behavioural Finance
  • Trading in the Zone
  • Learn to Earn
  • Book Summaries:
  • Rich Dad Poor Dad
  • Psychology of Money
  • The Intelligent Investor
  • The Richest Man in Babylon
  • Think and Trade Like a Champion
  • Value Investing and Behavioural Finance
  • Trading in the Zone
  • Learn to Earn
  • Tools:
  • CAGR Calculator
  • SIP Calculator
  • eLearnOptions
  • Future Value Calculator
  • Present Value Calculator
  • Atal Pension Yojana
  • Cost of Delay Calculator
  • Become a Crorepati
  • Tools:
  • CAGR Calculator
  • SIP Calculator
  • eLearnOptions
  • Future Value Calculator
  • Present Value Calculator
  • Atal Pension Yojana
  • Cost of Delay Calculator
  • Become a Crorepati

© 2023 Elearnmarkets. All Rights Reserved

  • Visit Elearnmarkets
  • Courses
  • Webinars
  • Financial Guides
  • Get Free Counselling
  • Visit Elearnmarkets
  • Courses
  • Webinars
  • Financial Guides
  • Get Free Counselling

Get Elearnmarkets App

No Result
View All Result
  • Article Categories
    • Basic Finance
    • Derivatives
    • Financial Planning
    • Fundamental Analysis
    • Technical Analysis
    • Marketshala
    • Miscellaneous
  • Language
    • Hindi
    • Bengali
    • English
  • Courses
  • Webinars

© 2020 Elearnmarkets All Rights Reserved