Try telling people that saving/ investing money as well weight management have one thing in common – nice record keeping, and they screw up their nose!

Are you in that category?

Do you shudder thinking of the painful paper work or data entry on the comp?

Then come to a simple rule of budgeting. Nothing original, found it on the net. Adapted a little that is all.

Let us call it the 50/30/20 rule…..till you are 30 years of age.

The first 50% of your income at least till your age of 30 will go into: Housing, transport, food, medical and term insurance.

The absolute basics. When I mean food, I mean basic food. Preferably groceries and fuel – not that Barista or CCD coffee. Housing again means the basic – a 1bhk if you are newly married, nothing more. Public transport, or a basic bike/ car. No frills.

The next 30% goes into meeting your goals: saving/ investing for making a housing down payment, kids education, car repayment, retirement corpus.

The next 20% goes into lifestyle expenses! this is where your Canon, Nikon, Pentax cameras, Samsung or Nokia phones, oh that lovely Apple Ipod, Bosch speakers, designer dress, fancy gyms, fancy massages, …..whatever.

As long as you can keep that ratio reasonably close to what you are doing, you are in fine shape.

By the time you are 36 the ratios need to change. There are 2 reasons for this. Your income is now more stable – your spouse’s ‘kid bearing phase is over’ and you are CLEARLY a double income or a SINGLE income family. At this stage you need to spend about 30% on essentials, 50% on the second slot – of investing money for goals, and the 20% on lifestyle expenses. If you cannot meet your goals, it will be NECESSARY for you to reduce the 20% to about 10% – so that you can save/ invest more. Remember it is now that you see your parent’s finances more clearly.

You are now responsible to realize that you need life insurance, kids education corpus, parent’s protection, etc. So you start allocating in a different ratio till you are about 50 years of age.

By the time you are 55, your goals are met and you are now perhaps concentrating only on your retirement….well that is a different story, is it not?

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  1. I think 30/50/20 rule is tough to act upon by most of people.
    Lets take example of family with net income of 1lakh per month.
    30K ? 50K for savings ? 20K for lifestyle
    Even with a single income of 1 lakh I this its hard to save 50K every month.
    I am assuming PF is not part of 50K savings.

  2. I am a govt employee so I have mandatory NPS subscrption.

    Should i consider it as investment and deduct my contribution to NPS from total investments or should i consider only take home salary.

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