What Is The 30-30-30-10 Rule? How Can It Help You Build A Retirement Corpus?
Individuals bear many demands on their income, from basic to discretionary expenses. It’s easy to overlook the need for a systematic expenditure that includes saving for the future. What if there was a straightforward method to help you balance your present needs with your future financial goals? The 30-30-30-10 rule is a simple yet powerful financial strategy to help you build a secure and comfortable retirement.
Under this rule, you devise a percentage-based budgeting mechanism that limits expenses across multiple essential categories.
Break down of earnings as per the 30-30-30-10 rule:
As per the breakdown above, you commit a hefty amount, almost 30 per cent of your income, to your investment plans and savings instruments. This is quite a large and sufficient segment dedicated to savings every month.
Let’s look at this example to understand:
Suppose your monthly income is Rs 50,000.
This is how your income will be divided across categorical expenditures as per the 30-30-30-10 rule:
This would create a discipline or routine that helps you save regularly. If you invest carefully in instruments that offer decent returns, you can easily amass a sizeable corpus for your retirement.
Further, this rule can streamline the money at your disposal and inculcate financial discipline such as a structured saving approach, debt management, emergency preparedness via hefty savings/investments, and a long-term focus by regularly contributing to retirement accounts.