Thumb Rule for Monthly Income Distribution

Financial education & literacy plays a very significant key role to give us an understanding that how money actually works in our life. Unfortunately, our schools & universities do not teach about financial education. That is the reason most people suffer from scarcity and financial short-sightedness throughout their life. Earning is important but managing personal finance is equally essential in which 90% of the people get failed. We don't need to be financial experts for managing our daily lives if we can follow some basic thumb rules of investments. 

To start with monitor your monthly budget allocation aka the 50:20:30 rule. This basically provides proper allocation between your earning, spending & investing. This is the first and most basic rule which cultivates your discipline habit for life. Out of Rs.100 earned, your income should be distributed in the following manner from day one: 

• Fixed expenses should not be more than 50%
• Variable expenses should not be more than 20%
• Savings & investments minimum 30%

Somehow If you are unable to save 30% of your income or not saving at all, then the best way to start savings 1% per month and gradually increase every month till you reach 30%. Small-small baby steps over a period of time give compounding benefits.

This allocation can further be bifurcated as:

Expenses	Allocation	Total
Fixed Expenses (needs)		50%
Liability / Loan / EMI	30%
Household Expenses (Grocery / Cloths / Living Expenses)	20%
Variable Expenses (wants)		20%
Discretionary Expenses (Vacation, Outing, Entertainment)	15%
Personal Development, Learning, Career	3%
Philanthropy, Donation, CSR & Contribution	2%
Savings & Investments (for future living)		30%
Retirement Planning	15%
Other Financial Goals	5%
Children Education	5%
Insurance	5%
TOTAL		100%