Money Saving Tips: In today’s world, it’s a common problem that despite a good income, your pockets are empty by the end of the month. Often, we don’t even realize how small daily expenses add up to a large sum. The salary comes in, it gets spent, and all that’s left is regret instead of savings. If you want to balance your expenses according to your salary, the 70/10/10/10 rule can prove to be an effective solution.

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What is the 70/10/10/10 rule?

The 70/10/10/10 rule is a simple financial formula that helps you manage your salary better by dividing it into four parts. This rule not only helps in controlling expenses but also opens the way for savings and personal development for the future. Following this rule reduces unplanned expenses and decreases financial stress.

70 percent for daily expenses

According to this rule, approximately 70 percent of your salary should be used for daily necessities. This includes house rent, children’s school fees, electricity and water bills, groceries, transportation, insurance, and other essential expenses. If your monthly expenses exceed this limit, it indicates that either you need to cut down on expenses or explore options to increase your income. This portion forms the foundation for maintaining your lifestyle.

10 percent for long-term investments

10 percent of your salary should be set aside for long-term investments. This money comes in handy for future major expenses, such as children’s education, marriage, home repairs, or fulfilling a big dream. Investments made in this portion make you financially secure and protect you from unexpected large expenses.

10% for Short-Term Savings

Many unexpected expenses can arise in life that you haven’t planned for. Medical emergencies, essential household repairs, or sudden travel expenses can all put a strain on your finances. In such situations, it becomes crucial to set aside 10% of your salary as short-term savings. This fund prevents you from having to dip into your long-term investments.

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10% for Debt Repayment and Personal Development

The final 10% is allocated for paying off debt or investing in personal development. If you have any loans or credit card debt, you should try to pay them off with this portion. If you don’t have any debt, this money can be used to learn new skills, take a professional course, or engage in activities that help you improve yourself. This portion helps increase your future earning potential.