What is the 50:30:20 rule that working women can use for savings? A beginner’s guide!

Indian women are playing a key role in not just being a housewife or salaried employees or investors but also have taken up leading roles either in startups or major companies. With the International Women's Day nearing on March 8th, let's have a brief understanding of the 50:30:20 golden rule that working women can use for their savings.

One of the simplest budgeting methods would be 50:30:20 rule which typically comes in handling while managing your money. It generally helps in narrowing down your pay checks for three major factors --- Needs, Wants, and Savings.

According to Priti Rathi Gupta, Founder of LXME, as a salaried woman, you can follow the 50:30:20 Rule, which is the golden rule of budgeting. It is a great idea to start with which allocates 50% of your income to needs, 30% to wants, and 20% to savings and investments. You can always customize the percentages as per your needs.

For example, let's suppose Miss A earns ₹25,000 per month. Using the 50-30-20 rule --- Miss A will remove 50% which would come to around ₹12,500 for necessities. Expenses can be electricity bills, education fees, tuition fees, mobile bills, and groceries among others. The 30% of the salary would be around ₹7,500 which can be kept for 'WANTs' such as shopping, movies, and dining out among others. The last would be 20% which would come to around ₹5,000 for savings.

There are ample affordable investment options such as mutual fund SIPs, equity shares, provident funds, pension schemes, and bonds available in the market where you can put your savings. Other than that, savings can also be used as emergency funds, or other requirements.

After the 50-30-20 rule, Rathi highlighted the following saving tips:

- Then chart out your goals in terms of ultra-short-term goals (less than 1 year), short-term goals (1- 3 years), and long-term goals (more than 3 years). Based on your goals, you can start investing!

- Start small but start investing and watch the power of compounding do its magic over time.

- Start investing for your retirement

- Build an emergency fund that is equivalent to 6-8 months of your monthly expenses as it can help you stay afloat in times of a financial crisis.

- “Don’t put all your eggs in one basket!’ Diversify your investments across asset classes to manage the risks.

- Plan your taxes early in the year to avoid making unfruitful decisions at the last moment.