30-30-30-10 Rule: Boost Savings with Smart Budgeting
5 min read | 3 months ago
All About the 30-30-30-10 Rule & How It Can Work Wonders for Your Savings
Finding it hard to save as much as you want? It is a common dilemma for most people, especially with rising expenses, EMIs, and other commitments to fulfill. At the same time, while some people are more inclined towards saving money, they often lack knowledge of the right financial strategy for their needs. No matter which segment you identify with, the need for a suitable financial blueprint is undisputed. This is where the 30-30-30-10 rule comes in handy. What is it all about? Let us learn a little more below.
30-30-30-10 Rule Meaning & Key Aspects
You can take the 30-30-30-10 principle as a thumb rule for saving a particular chunk of your income every month. It is a budgeting strategy based on percentages and benchmarks for expenditure in various segments. Here are its key aspects:
- You will allocate the first 30% of earnings for housing
- The second 30% goes into necessities
- The third 30% will go towards meeting financial objectives
- The final 10% is for discretionary expenditure
In this case, if you earn Rs. 1 lakh a month, then you should ideally spend Rs. 30,000 per month for housing (rent/EMIs for your home, home renovations/repairs, buying costs, etc.), necessities (bills, groceries, tax, fuel, transport, education, etc.), and financial goals (savings and investments for the short and long term) each. The remaining Rs. 10,000 can be allocated for things that you want, lifestyle purchases, etc. Now that you’ve got an idea of the plan, let’s see how it helps you boost your savings.
How Does the 30-30-30-10 Rule Help?
Here’s how the strategy can actually do your savings a world of good.
It keeps a big chunk for savings and investments
Unlike many other financial strategies that ask you to start small, the 30-30-30-10 rule keeps a big chunk of your monthly income for your savings and investments. The moment you assign 30% of your income for savings, it naturally helps you quickly scale them up to meet financial goals more quickly.
It is stricter in terms of lifestyle spends
This principle is also more stringent in comparison to many other budgeting blueprints, keeping just 10% for your discretionary and lifestyle costs. What it does is make you more disciplined in the long run, while steadily allocating more towards future savings than these expenses.
Housing costs are kept separate too
One of the best things about the 30-30-30-10 rule is that housing costs are completely separated from other essential expenditure, unlike many other budgeting rules. It is necessary, since rising prices/rentals have made housing more expensive over the years.
It helps you plan better for retirement
Another good thing about following the 30-30-30-10 rule is that you can plan better for your sunset years after you leave the workforce. Since you will allocate 30% of your income for savings and investments, this gives you adequate room to strategically invest for building a retirement corpus. You can allocate at least 30-40% of this monthly investment amount for your retirement planning. This will give you a financial footing like no other since your money will compound and grow in the long run.
Conclusion
If you wish to make the most of your earning years by strategically meeting varied financial needs and planning for a smooth retirement, the 30-30-30-10 rule is worth considering. It helps you allocate your income efficiently towards meeting your necessities, housing costs, savings needs, and even your lifestyle/discretionary spends. With a more disciplined approach, you will be able to fulfill all your desired financial goals, while staying comfortable even after retirement. If you are looking to open a bank account with a reliable financial institution, consider Unity Small Finance Bank for its attractive interest rates between 6-7.5% per annum.
About Unity Small Finance Bank
Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.
