50 30 20 budget rule - the golden rule of budgeting

do you ever find yourself looking for ways to make and follow a budget? people often make the responsible decision of creating a budget for themselves, but they don’t know how to go about it. but worry not, because we are here with the ultimate thumb rule of budgeting. the 50-30-20 budget template is a game-changer that works for almost everyone irrespective of their income. it is a rough guideline that one can follow to achieve their financial goals and understand their budgeting needs.


but before we dive into the magical world of budgeting, you need to understand the importance of budgeting and why you need it so early in life.


why do you need a budget?

these days with several budgeting apps at our disposal, creating a budget has become simpler. however, till we don’t understand our budgeting goal, these apps are of no use. hence, let us get our heads cleared by first decoding the reason for creating a budget for ourselves.


1. to monitor expenses

what’s the point of creating a budget if we are not able to control our excessive expenses that can easily be avoided? it does not matter if we use the 50-30-20 budget template or any other budgeting hack if we don’t monitor our expenses. despite having a budget set aside for wants, one needs to look into expenses that are unnecessary and can be ditched altogether. hence it is very important to monitor your expenses and to make changes in your budget accordingly.

2. to divide income

the 50-30-20 budget template may not work for everyone to the T, but it gives you a rough idea of how you can divide your income. as per your financial goals, creating a budget will help you understand the allocation of your income based on your personal financial goals or your family needs. you can also change the division of your income as your goals change for a particular period. hence creating a budget helps in making your income flexible and resourceful for different goals.

3. to achieve financial goals

there are only three things that people need to know in order to achieve their financial goals and they are budgeting, budgeting and budgeting. so, guys, if you don’t budget, say goodbye to achieving your financial goals on time. splurge all you want, but budget your expenses, parties, aspirational purchases and any other things that you think will involve money. make it your life mantra to budget everything when hopping on to the 50-30-20 budget template to achieve the set financial goals.

benefits of budgeting


now that we have convinced you to budget responsibly, let’s push you further and speed up the process by discussing the benefits of budgeting. so, let’s get down to it


1. savings

being a young person with a consistent income, it is natural to have wants that may not be necessary. although, as we grow, we understand that it is impossible to always get everything the heart demands. thus, by having a specified amount at our disposal, the shopaholic diva inside us will learn to practice budgeting and saving. budgeting to avoid careless expenditure and savings for our expensive shopping sprees. we will be able to allocate a stipulated amount towards our savings kitty. the amount could be nominal, but the practice of beginning to save is what is important.

2. scope for investments

investments are the buzz these days with people investing in SIPs, cryptocurrency, real estate, etc. with so many investment options and easier accessibility, budgeting provides a scope for you to invest generously. research all about investments with akudo. with proper budgeting and income distribution, you can take into account investment opportunities and plan your whole budget around your investment plans. this will help you set aside a certain amount for various investments and achieve your financial goal.

3. long-term financial planning

with all your income budgeted appropriately, you have everything mapped out monetarily. now it will become easy for you to set some long-term financial goals and plan it around your annual income. you can also set a deadline for yourself to achieve the goal, be it 5 years or 10 years. your long-term financial planning can include buying a house, a car, getting married or opening up your own start-up.

the 50 30 20 budget matrix


the beauty of the 50-30-20 budget template is its simplicity. it helps you categorize your income in 3 sections after-tax deduction – needs, wants and savings & debts. this budgeting rule ensures sustainable and effective income budgeting. so, let’s break it down further and see how it is categorized.


50% of your income is allocated towards your needs. needs include house bills like electricity, water, gas etc, groceries, school fees and other mandatory expenses.


30% of your income goes towards your personal wants that including shopping, partying, entertainment, travel, etc.


20% of your income is directed towards your savings, retirement funds, repayment of loans and any other long-term investments.


after your 50-30-20 budget calculation, you are sorted with your income distribution. now you can easily track and monitor your expenses throughout the month. at the end of the month, you can determine how much amount of income each category requires exactly. if there is extra money left, you can carry it forward to the next month if you have any upcoming extra expenses or you can simply add it to your savings fund. savings can never be enough :p


now let’s try to apply this rule to a regular employee’s income and see how it works out.

so, our guy’s name is Arjun who works at an IT company. his salary is INR 9 lacs per annum. this means that every month, after various deductions like provident fund, taxes, professional tax, etc. his in-hand salary is close to INR 60,000.


now Arjun’s next step is to divide INR 60,000 as per the 50-30-20 budget template, which means:

INR 30,000 for his needs like bills, groceries, rent, etc.

INR 18,000 for his wants like travel, leisure, birthday party, etc.

INR 12,000 for his savings, investments and education loan repayment.


these numbers can change basis various factors like:


- salary increment

increase in salary during quarterly or annual salary revision.

- extra savings from the previous month

carrying forward savings from the previous month which will increase the amount of savings for the current month.

- upcoming extra expense

if Arjun has a friend’s wedding to attend or if he needs extra money to plan his birthday bash, the numbers might go crazy. but with this rule, he can survive it.

- bonus salary

this “bin mausam ki baarish” is what every employee like Arjun strives for.

- increase in investment plan

with fluctuating crypto and stock prices, Arjun might want to invest a little extra during the dip.

needs and wants differ from person to person. but what we can help you best with are the investment plans and savings plans. below are some of the best investment options that you can explore.

1. set up an emergency fund

one can never be ready for any unexpected situation. set up a separate emergency and medical fund in the 20% category. it could start off from a nominal amount and increase from thereon. however, ensure that this is separate from your savings.

2. contribute to retirement plans

again, this cannot be stressed enough, but planning for your retirement is a gift to yourself in your old age. your retirement days are for you to enjoy with your family and friends. you don’t want to be running around earning money for basic necessities.

3. life insurance


yes, we know you get medical insurance from the company you work at. but what about life insurance? as an adult, it is your responsibility to ensure that your family is financially secure and can look after themselves.

4. mutual funds

investing in mutual funds through sip is a great option as it does not demand a huge amount of investment in one go. you can enjoy the magic of compounding and reap the benefits by holding it for the long term.

5. cryptocurrency


well, this is the new eye candy in town. with several crypto investment apps like Coinswitch Kuber, CoinDCX, WazirX, etc. cryptocurrency has become accessible to all. but study the crypto market and regulations before leaping into it.

6. stocks

before dipping your toe into the stock market world, research the companies you want to invest into. understand the economy and the past histories of the shares. it is a risky game, but the gains are worth it if played safely.

7. investing in business ideas


giving an idea a boost through your investment could reap amazing returns. however, you need to understand the whole business model to avoid scams and unprepared short-term plans.

so, guys, now that we have the rule in place, it’s time to get your income in place. hit it with your best shot.


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