In today’s world, it has become a common problem that despite earning a good salary, young people struggle with a lack of money at the end of the month. Even after salary increases, their financial situation doesn’t improve. The biggest reason behind this is considered to be the habit of spending without any solid planning. Digital payments, easy EMIs, and online shopping have made spending so easy that saving has become equally difficult.
Financial experts say that the habit of budgeting is gradually disappearing among today’s youth. The difference between needs and wants is blurring. As a result, big expenses start as soon as the salary arrives, and no solid preparation is made for the future. This is why even a small emergency can lead to a money crisis.
Understand the 70/10/10/10 formula
To avoid this problem, experts advise adopting the 70/10/10/10 formula. This formula is based on dividing your monthly salary into four parts, which automatically balances expenses, investments, and future planning.
70 percent for expenses
The largest part of this formula is allocated for daily expenses. This includes house rent, groceries, electricity and water bills, transportation costs, insurance premiums, children’s fees, and other necessary expenses. This part helps you understand whether your lifestyle is in line with your income.
10 percent for long-term investment
The second part of this formula is for long-term investments. This is the money that gradually builds your wealth. This amount forms the foundation of future financial security through mutual funds, retirement plans, or any disciplined investment.
10 percent for short-term savings
Short-term savings act as a safety net for your life. This portion is for emergency funds, medical expenses, travel plans, or unexpected large expenses. This prevents you from needing to borrow money or liquidate investments.
The last 10 percent is for debt repayment or investing in yourself
The final part of the formula depends on your situation. If you have debt, it can be used to pay off high-interest loans. If you don’t have debt, this money can be invested in skill development, education, or personal growth to increase your future earnings.
What this formula changes
The 70/10/10/10 formula doesn’t just teach you how to manage your money; it also provides peace of mind. You don’t have to worry about every expense because you know exactly where each portion of your money is going. This eliminates end-of-month stress and makes financial decision-making easier.