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How Much Can You Invest Based on Your Income Using the 50-30-20 Rule

“Few things are harder to put up with than the annoyance of a good example.” – Mark Twain 😁

So, we’re here to challenge this notion today and instead of invoking annoyance, we’re confident we’ll instead be able to convince you about how easy saving and investing can be – using one, well-thought-out example.

We’re going to try to help you build a monthly budget for yourself, and in the process uncover – 

  1. How much you can invest based on your salary.
  2. How Deciml can help you invest diligently to meet that goal.

The Assumptions

We have created this example with two key assumptions to create a clearer picture of what your budget might look like – 

  1. You are making ₹50,000 a month.
  2. Amounts for all your transactions. 

The Principle – The 50-30-20 Rule

The 50-30-20 rule is a budgeting strategy that suggests you divide your income into three main categories – 50% for needs, 30% for wants, and 20% for savings. This is a valuable strategy, especially if you’re just starting out managing your own finances, and want a simple yet effective plan to get the ball rolling!

The Breakdown

It’s the 30th of the month, and ₹50,000 has just been credited to your account. After that massive sigh of relief, you decide to sit down and chart out a budget for yourself. Good job! 

Now, the first question you need to ask yourself is – how much of your salary can you invest, if you are to follow the 50-30-20 Rule?

 

50 (Needs)

30 (Wants)

20 (Savings)

Total Amount

₹25,000

₹15,000

₹10,000

All Allocations

Rent – ₹8,000

Utilities – ₹2,500

Groceries – ₹1,500

EMIs – ₹6,000

Insurance – ₹3,000

Transport – ₹2,000

Hobbies – ₹3,000

Experiences – ₹3,000

Dining out – ₹5,000

Leisure activities – ₹3,000

Emergency Fund – ₹3,000

Retirement fund – ₹2,500

Investments – ₹3,000

Debt payment – ₹1,500

Total Outflow of Cash

₹23,000

₹14,000

₹10,000

Still in Your Wallet

₹2,000

₹1,000

₹0

Key Action

Spending

Spending

Saving

Table 1: 50-30-20 Breakdown

Now, let’s isolate how much you are expected to invest, across categories, to determine your monthly investment amount – 

  1. Needs – Insurance, towards which you need to allocate ₹3,000, is a form of investing that offers you a security blanket in case of medical or life-threatening emergencies. You are constantly investing to make sure that your costs are covered in case any unforeseen expenses arise. You also have ₹2,000 left over after spending on all your needs (Hmmm… Potential!).

     

  2. Wants – No investing happening here, guys. But hey – it looks like you have ₹1,000 left over from spending on your wants as well (Hmmm… More potential!). Good job! This is a tough thing to do.

     

  3. Savings – You are allocating ₹3,000 to investing as a part of your savings strategy (yay!). You are also investing in an emergency fund (long investment of ₹3,000 per month), and a retirement fund (long-term investment of ₹2,500), and are helping yourself clear your past debt. Wins all around!

In totality – you can allocate ₹11,500 toward investing across various instruments. You also have an additional ₹3,000 left over to invest a little extra! This means you can technically go that extra mile and invest ₹14,500 in a month. 

So, with a salary of ₹50,000, and a general adherence to the 50-30-20 Rule, you are looking at investing anywhere between 23-29% of your salary – and you can easily do so if you simply follow the rule… But sometimes, you might need a little help!

Recession

How Can Deciml Help?

Let’s go back to the table, but give it a Deciml twist! 

 

50 (Needs)

30 (Wants)

20 (Savings)

Total Amount

₹25,000

₹15,000

₹10,000

All Allocations

Rent – ₹8,000

Utilities – ₹2,500

Groceries – ₹1,500

EMIs – ₹6,000

Insurance – ₹3,000

Transport – ₹2,000


Thank you, Round-Ups & Daily Deposits!

Hobbies – ₹3,000

Experiences – ₹3,000

Dining out – ₹5,000

Leisure activities – ₹3,000


Thank you, Round-Ups & Daily Deposits!

Emergency Fund – ₹3,000

Retirement fund – ₹2,500

Investments – ₹3,000

Debt payment – ₹1,500


Thank you, Round-Ups & Daily Deposits!

Total Outflow of Cash

₹23,000

₹14,000

₹10,000

Still in Your Wallet

₹2,000 


Lump Sun investing FTW.

₹1,000 


Lump Sum investing FTW.

₹0

Key Action

Spending

Spending

Saving

Scope to Invest with Deciml?

Table 2: A Little Help from Deciml

Sometimes a little help (and a little automation!) can be particularly useful when you’re starting out investing. Across the categories of the 50-30-20 Rule, Deciml can help you in the following ways – 

  1. Needs – You can invest with literally every spend, plus a Daily Deposit of ₹60 for the ₹2,000 still in your wallet!

  2. Wants – You can invest with literally every spend, plus a Daily Deposit of ₹30 for the ₹1,000 still in your wallet!

  3. Savings – You can invest with literally every spend, plus a Daily Deposit of ₹100 for a total ₹3,000 investment.

Automating your investments and leveraging Daily Deposits, Round-Ups, and Lump Sum investing adds routine and consistency to your investing; a crucial element for long-term financial success. Now that you know how much you need to try and invest out of your salary of ₹50,000, you are better equipped to decide just how much you want to invest through Deciml – and all that’s left to do is set your limits!

Of course, these numbers will vary based on your actual expenditures; some months you might end up investing more than you planned, and some months you might fall short. But remember that you’re in this for the long haul – and over time these ups and downs will balance each other out. Keep in mind that investing can be as easy as you want it to be. The trick lies in doing your due diligence, budgeting every month, and then sticking to your budgetary allocations to the best of your ability!

So – are you up to follow the example? 😎

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