SAVE, SPEND, SECURE

How do we manage our finance?

- By B. N. Bharath

Is money everything in life? Definitely not. However, just as health, education, relationships, knowledge, and hard work are important to us, money too is a vital part of our lives. All said and done, we are not sure of the quantum of money required for a comfortable and peaceful life. How much money should be saved from our earnings, and how much can be spent? These are not million-dollar questions. If the following tips are kept in mind, we will be able to manage our money properly.

50-30-20 Rule

With this simple rule, we can manage our finances effectively. Fifty per cent of our income might be required for monthly needs such as house rent, provisions, milk, water, electricity, and payment of EMIs (Equated Monthly Installments) on various loans. We might also require another 30 per cent of our income for entertainment—expenses like cable or satellite TV subscriptions, movie outings, restaurants, or travel. The remaining 20 per cent must be compulsorily saved in secure financial instruments. This is the bare minimum we should save. Of course, we should aim to save more than this. The more we save, the more financial security we build for the future. Importantly, this additional saving should not come at the cost of necessities.

If our monthly income is, say, ₹50,000, then 50 per cent—₹25,000—is allocated for essential monthly expenses. Thirty per cent—₹15,000—is for entertainment, and the remaining 20 per cent—₹10,000—is the amount we must save.