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.

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What Is The 30-30-30-10 Rule?

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:

1. 30per cent for Essential Expenses: The first 30 per cent of your income goes towards housing expenditures and utilities like groceries, transportation, and healthcare. The goal is to keep essential living costs manageable and within a budget.
2. 30per cent for Financial Goals: Next, you allocate 30 per cent of your income towards your long-term financial goals, including retirement savings. Contributions to retirement accounts like PF, FDs, NPS, or other investment instruments fall into this category.
3. 30 per cent for Lifestyle Choices: You must also allocate 30 per cent of your salary towards unforeseen discretionary spending such as dining out, entertainment, vacations, and hobbies. This will ensure you enjoy your present life without compromising future financial stability.
4. 10per cent for Debt Repayment or Savings Buffer: The last 10 per cent of the income should be dedicated to paying off debt or creating an emergency fund. Clearing high-interest debts or maintaining a savings buffer can provide financial resilience and reduce stress in the long term.

How To Build A Retirement Corpus With The 30-30-30-10 Budget?

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.

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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:

1. Rs 15,000 to be allocated to housing expenses such as rent (and other EMI).
2. Rs 15,000 to be used for essential expenses such as groceries, utility bills, transportation, etc.
3. Rs 15,000 set for your financial goals, including retirement funds. These can be both short-term and long-term goals.
4. The remaining Rs 5,000 could be fixed for your discretionary spending, such as dining out, entertainment, online orders, etc.

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.