50/30/20 Rule: The Easiest Way to Manage Your Monthly Salary

Managing your money doesn't have to be a constant battle. Whether you're at the beginning of your career or just trying to maximize your take-home pay, the 50/30/20 rule is probably the simplest budgeting method available.

The 50/30/20 rule allows you to effortlessly break down your monthly salary into easy-to-track segments to meet your needs, enjoy the pleasures in life, and plan for a secure future, and you do not need to employ financial jargon or arcane tools to do it.

What Is the 50/30/20 Rule?

The 50/30/20 rule is a simple budgeting strategy that divides this number into three categories using your income after-tax each month:

• 50% to Needs

• 30% to Wants

• 20% to Savings and Paying Debt

It's a simple rule that helps you put structure into your spending and feel confident with your monthly financial decisions.

Step-by-Step Breakdown

50% for Needs

50% of your income should be spent on essential expenses—these are the essential things that you rely on to go day to day. 

These include: 

• Rent or home loan EMI

• Groceries and basic food

• Utility Bill (electricity, water, internet)

• Transport (fuel, metro, cabs)

• Basic medical care & insurance

• Minimum loan repayments.

If you find that your essential expenses take up more than 50% of your income, it might be worth seeing if you can cut costs in some way. 

For example, you may be able to move to a cheaper area or find ways to optimize your electricity or grocery bills.

30% for Wants

30% of your budget is for your wants. The lifestyle expenses that make life enjoyable but are not necessary. 

Some examples are:

• Ordering takeout from food delivery apps.

• Buying clothes or gadgets.

• Streaming services like Netflix or Spotify.

• Weekend trips or vacations.

• Eating out, hobbies, and gym memberships.

This part of your budget is meant to let you enjoy life without being unnecessarily excessive. Meaning, you don’t deny yourself, but also don't overspend for what you want.

20% for Savings and Repayment

The last 20% of your earnings should be allocated towards financial growth and security. 

Examples include:

• Emergency savings contributions

• Recurring deposits, mutual funds, or other investment vehicles

• Additional loan payments (over and above the minimum required)

• Retirement savings

• Saving for future goals, like a home, wedding, or car

Taking care of each one of these items in your 20% allocation can have a positive impact on your long-term financial stability. 

Starting where you can is important, and consistency will also play an important role.

Why This Rule Works So Well?

The beauty of the 50/30/20 rule is its simplicity. Instead of looking at the tiniest details like a detailed budgeting method that involves tracking every single expense, the 50/30/20 rule is a much higher-level guiding principle. 

You know where to put your money at the beginning of the month so you can plan and not overspend. The rule also helps reduce financial stress. 

Wrapping It Up

If you need money quickly and don’t want to rely on family or friends, digital platforms like Rupee112 offer a solution. 

Rupee112 is designed for quick approvals and swift access to loans online, enabling you to get the cash for your urgent need without the worry of paperwork or waiting in line.