Smart Money Saving Formula: In today’s times, rising inflation has broken the back of middle-class families. As soon as a salary arrives, it feels as if pre-planned expenses are pounced upon. Home loan or personal loan EMIs, credit card bills, house rent, children’s fees, and electricity and water expenses all together reduce the bank balance to almost zero at the beginning of the month. Sometimes it’s surprising that despite not going out much or eating at expensive restaurants, where did the money go?

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This is why every middle-class person today wonders how to create a household budget and save money on a low salary. With proper planning and a little understanding, this problem can be controlled to a great extent.

What is the 40-30-20-10 Rule and How Does It Work?

If you want to manage your salary effectively, the 40-30-20-10 rule can be extremely effective. This rule balances spending and savings by dividing your income into four parts. Suppose your monthly salary is 30,000 rupees. In this situation, the first part of your salary is allocated for essential expenses, including house rent, groceries, electricity and water bills, children’s education, and other essential needs.

The second part is dedicated to your lifestyle and personal enjoyment. This could include outings, spending time with friends, watching movies, or occasionally eating out. The third part is crucial for future security, set aside as an emergency fund so that you don’t have to resort to debt in case of an unexpected need. The last part is set aside for investment, which can be invested in SIPs or other safe investment options.

How this formula protects against debt and defaults

The biggest advantage of this rule is that it prevents you from accidentally falling into debt. When expenses are pre-determined, and savings become automatic, the need for credit cards or instant loans is reduced. Gradually building an emergency fund helps you mentally prepare for unexpected expenses.

The right habits to control expenses

Just creating a budget isn’t enough; it’s equally important to follow it. Writing down all your expenses at the beginning of the month is extremely beneficial. This helps you clearly see which expenses are necessary and where unnecessary money is being spent. Making a list of essential items before going shopping is also an easy way to control spending.

Often, attractive offers at malls and online platforms tempt people to over-purchase. Instead of falling prey to such offers, it’s better to shop based on your needs. For everyday essentials, a nearby grocery store or local showroom can prove more economical. Taking advantage of festive season sales with proper planning can reduce expenses and meet your needs.

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Why Stay Away From Instant Loans?

These days, instant personal loans available through mobile apps seem very convenient, but the high interest rates charged on them can worsen your financial situation in the long run. Their annual interest rates can sometimes reach 40 to 50 percent. In such a situation, a small convenience can become a major problem in the future. It’s best to build an emergency fund and stay away from such loans.