Does your salary arrive at the start of the month but fail to last? As soon as the money is credited to your account, expenses like EMIs, rent, groceries, and shopping disrupt your budget, leaving you with nothing in hand by the end of the month.
There is a simple way to avoid this end-of-month financial crunch. Whenever you receive your salary, divide it into five distinct parts. Each part has a specific purpose. This allows you to know in advance exactly how much to spend and how much to save.

What is the formula?
You must follow this rule with complete sincerity. Under this formula, 50% of the salary is allocated for essential expenses, 20% for investments, 10% for an emergency fund, 10% for personal expenses, and 10% for major goals. Let’s understand this with an example.

1. Set aside 50% of your salary for essential expenses
At the start of the month, the worry of paying rent or restocking household supplies often arises; therefore, the portion for essential expenses should be set aside first. This can include house rent, EMIs, groceries, utility bills (electricity and water), children's school fees, and other daily necessities.

For instance, if your salary is ₹50,000, you could allocate approximately ₹20,000 to this category. You should also aim to keep your essential expenses within this limit.

2. Allocate 20% for investments
The second step in managing your salary involves planning for the future. If your salary is ₹50,000, it is important to invest around ₹10,000 every month. You can put this money into various investment plans.

3. Set aside 10% for emergencies
Unexpected expenses sometimes arise when there is no money left. In such situations, having a separate fund for unforeseen costs is crucial. You can set aside 10% of your salary for this purpose. With a salary of ₹50,000, this amount would come to ₹5,000 per month.

4. Set aside 10% for personal expenses
It often happens that, in the process of saving and managing expenses, we neglect doing anything for ourselves. Therefore, it is important to set aside money every month not just for bills and investments, but also for leisure, entertainment, and personal indulgences. With a salary of ₹50,000, ₹5,000 can be allocated to this category.

5. Set aside 10% for your wishlist
Finally, there is the portion dedicated to goals you wish to achieve in the coming years. This could include buying a car, making a down payment on a house, or fulfilling a major personal ambition. With a salary of ₹50,000, ₹5,000 per month can be set aside for this.
Additionally, as your salary increases, you can gradually raise the amount allocated to this category.

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