What is the 70/30 rule of budgeting and investing? Know details (2024)

It is crucial for investors to place their money in assets that have the potential to generate high returns given the growing inflationary fears. There are techniques that, if used properly during these uncertain times, will not only assist conserve money but also make one a crorepati.

If you’re finding it hard to manage your money, perhaps this simple formula is the easiest route to take. By simply establishing some guidelines, the 70/30 rule gives you more leeway in how you spend your money. This guideline is fantastic because it is based on a percentage rather than a specific monetary number. As a result, you may still use the rule even if your income changes over time; simply recalculate it to account for your new revenue.

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What is the 70/30 rule?
According to the 70/30 budgeting method, 70% of your income must be used to cover things that you just cannot do without. This area includes a variety of expenses, including rent, food, shopping, recurring bills, travel, miscellaneous costs, and others.

Does the question arise of what should an individual do with 30%?
Let’s bifurcate the 30% in 3 simple parts, i.e, 10-10-10.
The first 10% must fund the debt settlement. The 10% must be used to pay off any debt that you have and then move ahead.
The other 10% must cover long-term capital investments, investments, retirement savings, purchases of businesses or real estate, PPF and NPS contributions, as well as other forms of future investment. This is the place from which you can save money if you wish to pay for education.
The final 10% is for charity and donation. Now it’s up to you if you want to donate it or not. If not then you can save that money for yourself. You still make a profit.