1. Build your Credit Score
2. Reduce your Current Borrowing / EMI Costs
There are many ways to invest and plan your budget. Just look on the internet a bit. You’ll find several ways to budget. But that is not the problem.
The problem is to choose the one that suits you best. There is no cookie-cutter solution. There is no one-stop shop which gives you the best solution. Investment advisors can suggest plans, but it all boils down to you. Only you know which budgeting plan can be best for you.
In this article, we are going to talk about one specific way to invest or budget…
Now, you may have heard of the 50/30/20 rule for budgeting. It is one of the most common one. Under this budget, 50% of your monthly net income is given over to covering needs, 30% to covering wants, and the remaining 20% towards covering savings and investments. In the last section, you can have various savings, emergency funds, and investments.
But why did we explain what the 50/30/20 budget plan is? Is this article not about the 70-30 budget plan?
Yes it is, but it is also similar to the 50/30/20 budget plan.
In the 70/30 budgeting plan, 70% of your income goes towards meeting your expenses which you absolutely cannot do without. This category covers a wide range of things like rent, utility service bills, food, shopping, recurring bills, travelling, miscellaneous expenses, and others.
As you can see for yourself, these are things you cannot do without at all. For instance, if you live in a rented apartment, you totally need to give rent each month. It is not something you can avoid.
Here is what the rule says about the remaining 30%.
10% needs to be invested into savings. However, if you have debt, that needs to be settled first. The debt settlement needs to come from the first 10%.
The second 10% needs to cater to long-term capital investments, investments, saving for retirement, investing or spending on a business or a property, on PPF, on NPS, and other means of investing for the future. If you want to save for college, this is where you can save from.
The third and final 10% is for giving to donation or charity, if you want. In case you do not want to give your money to charity or donations, you save money. 10% saved per month is a huge amount. However, do know that money given for donations and charity is non-taxable.