What is the 30-30-30-10 Formula and How to Use It?
As income grows, expenses also tend to rise. No matter how much your salary is, managing it can be challenging. Often, by the end of the month, the salary is finished but the needs remain. This is a common problem for middle-class families because proper salary management is often difficult. Let's learn how the 30-30-30-10 formula can help you manage your income effectively.
Understanding the 30-30-30-10 Formula
This formula helps divide your salary into different portions, making it easier to manage. The salary is divided as follows:
- 30% for household expenses
- 30% for other essential expenses
- 30% for savings for the future
- 10% for personal desires such as movies, travel, hobbies, etc.
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Example of the 30-30-30-10 Formula
Suppose a person earns ₹50,000 per month. According to this formula:
- 30% (₹15,000) goes to household expenses
- 30% (₹15,000) goes to other necessary expenses
- 30% (₹15,000) is saved for the future
- 10% (₹5,000) is spent on personal desires
With this approach, 60% of the salary is used for essential needs such as utility bills, groceries, etc. Saving 30% every month builds a strong financial foundation for the future, which can be invested safely in options like Fixed Deposits (FD), Recurring Deposits (RD), or moderately risky investments like mutual funds. Spending a small 10% on personal desires keeps you satisfied and motivated.
This simple and effective formula allows you to manage your salary wisely while balancing savings, necessities, and personal enjoyment.