Why does your salary run out of money as soon as it arrives, and how can you save it? This question arises for almost every working person. A long list of expenses appears in the early days of the month, and often, you don’t even get a chance to think about how to manage your budget. If you, too, struggle with a lack of money every month, some simple financial formulas can provide great relief. Finance creator Ankur Warikoo shares five rules in his video that anyone can follow to increase their savings and strengthen their financial position.
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The Secret to Salary Management: The 50-30-20 Rule
Dividing your salary into three parts as soon as you receive it is the easiest way to manage your money. Half of your total income is spent on essential needs, such as rent, groceries, medicines, and children’s fees. After this, 30% can be gradually used for optional expenses, including dining out, travel, shopping, and entertainment. It’s important to invest the remaining 20% each month in savings and investments. This portion strengthens your financial foundation over time. For example, if you invest 25,000 rupees on necessities, 15,000 rupees on lifestyle expenses, and 10,000 rupees on investments, you’ll accumulate a total of 120,000 rupees in a year.
Why an Emergency Fund is Important
Financial crises can arise unexpectedly. An emergency fund comes in handy during such times. If your monthly expenses are 40,000 rupees, keeping at least six months’ worth of funds, or approximately 240,000 rupees, in a separate bank account ensures your security. In situations like job loss, illness, or other major expenses, this fund serves as your financial shield and prevents pressure on your salary.
Use your credit card wisely
Credit cards are not income, but a responsibility. Therefore, if your card limit is 100,000 rupees, you should never use more than 30,000 rupees per month. Doing this keeps your credit score good and prevents the interest burden from increasing at billing time. The most important thing is to make your monthly payment in full on time, as late payments can tarnish your financial image.
Pay Off Expensive Loans First
If you have multiple loans, it’s wise to pay off the loan with the highest interest rate first. For example, prioritizing a personal loan, which typically carries an 18 percent interest rate, can save you thousands in interest. Using bonuses, incentives, or any additional income to prepay this loan gradually lightens your burden.
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Understand When Your Money Will Double Using the Rule of 72
The biggest question in investing is when your money will double. The Rule of 72 makes this calculation very easy. Dividing the interest rate by 72 tells you how long it will take for your investment to double. For example, if you’re earning 12 percent interest, your investment will double in six years. Similarly, the amount doubles in nine years at 8 percent interest and in about five years at 15 percent interest.