1.This is a thumb rule that can help in the budgeting aspect of personal finance.
2.50% of aftertax income should be used for needs, 30% for wants, and 20% for saving and investing.
3.Needs are mandatory expenses that are required for survival. These include utility bills, rent, EMIs, groceries, insurance premiums, etc.
4.Wants are anything that are not essential but are good to have, such as movies, outings, shopping and vacations.
5.This is a simple rule that helps in creating a savings mindset while ensuring that there is money for enjoying life too.
Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.