Those who believe that it requires vast knowledge and great expertise to make an effective financial planning – this standard rule is for them!
It is very important to make a plan that you can understand and be involved with. Keeping a few things in mind can help you avoid the common money mistakes.
What is personal financial planning?
People struggle with money simply because they cannot plan and balance their expenses with their earnings. More often than not, people have no clear idea about
- Where to spend
- How much to spend
- How much to keep
- What to do with the kept amount
A perfect personal financial planning is all about chalking a plan out that answers all these questions in such a way that it creates a better future for you.
Moreover, the planning should also comprise how to manage some of the important expenses like; Higher Education, Marriage (self or kid’s), Assets and most importantly, Retirement
The 50-30-20 Rule to PLAN and MANAGE Personal Finance
The rule helps you decide how to plan the expenses of the entire month from the available amount of money. The numbers actually depict the ratio of how the expense should be divided into different categories.
Let’s explain that:
After you set aside the SAVINGS of the month, the remaining amount is for the expenses and it includes all sorts of expenses of a month. We have just categorized the expenses so that we can segregate them properly.
50% – Basic Needs (It includes – Ration, Groceries, Foods, Monthly EMIs, Rents, Bills and etc.)
30% – Pleasure Needs (It includes – Clothes, Gadgets, Cosmetics, Restaurant Bills, Holidays and etc.)
20% – Savings (It is the amount that you must set aside prior to plan the rest, already mentioned earlier)
This should be the basic structure of the personal financial planning for any person, regardless of whether he/she is married or single, have a family or not.
Below you can find an INFOGRAPHY that explain in a very simple way how you can manage your personal financial planning. If you follow some simple steps of finances, you will be able to improve your financial status within a few years or so.
The AIM is to let you manage your money all by yourself and don’t depend blindly on financial expert’s advice.