How can popular budgeting strategies help you?

Budgeting sounds easy, right? But once money actually hits your bank account, things get blurry, savings shrink, wants grow, and goals feel distant.

You’ve probably heard of rules like 50/30/20 or save before you spend. But which of these actually work? And more importantly, which one is practical for you?

Let’s explore 6 popular budgeting strategies with real-life breakdowns.

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Buying Car Rule: 25/5/20

Cars depreciate fast. This rule makes sure your car doesn’t eat into your future wealth. Here’s how:

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Example

Let’s say if you earn ₹1 lakh/month, here’s how to buy a car the smart way-

Pro Tip: If your total car expenses cross 20% of your monthly income, switch to a more affordable option. A car should offer convenience, not compromise your ability to handle bigger EMIs like a home loan.

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30X Retirement Rule

Many Indians dream of a comfortable retirement but underestimate how much they'll need. With rising inflation, today’s expenses will be significantly higher 20–25 years from now.

That’s why the traditional 25x rule falls short for many in India. Instead, you can follow the 30x retirement rule-

Save 30 times your annual retirement expenses to ensure your money lasts 25–30 years.

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Example

Let’s say your annual expenses are ₹8 lakh, and you plan to retire in 25 years.

Pro Tips: 

• Go beyond fixed deposits, include equity mutual funds, index funds, and a liquid savings buffer to balance risk and access.
• Post-retirement income is often subject to tax, which should be accounted for in final planning.

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Buying Home Rule: 5/20/20/30

Buying a home is a big dream and a bigger financial responsibility. However, rising property prices and easy home loan approvals are pushing many Indians to buy homes they can’t comfortably afford. 

To avoid the financial strain, you can follow this rule: 

Note: Up to 5× your annual income is the maximum recommended. Buying below this is even safer.

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Example

Let’s say you earn ₹1.5 lakh/month. By sticking to this rule, here’s the maximum home value he can afford without stressing his finances.

Pro Tip: If your EMI goes beyond 30% of your income, consider increasing your down payment to 30–40%, extending the loan tenure to 25-30 years, or opting for a smaller property in the same area. Buy what you can sustain, not what the bank approves.

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40% EMI Rule

In India, high interest rates make repayment difficult, especially for low-income and informal workers. A poor credit history often results in high-cost loans that trap borrowers in a debt cycle. However, you can protect yourself by following the 40% EMI rule:

Keep your total EMIs below 40% of your monthly income, so you can repay loans without stress and avoid a debt spiral.

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Example

If your monthly in-hand income is ₹1,00,000, your total EMI payments (including home loan, car loan, and personal loans) should not exceed ₹40,000 (₹1,00,000 × 40%).

Pro Tip: Keep your EMI load light to leave room for investments and savings. Avoid being EMI-trapped.

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6X Emergency Fund Rule

A recent survey found that 75% of Indians have no emergency fund, leaving them vulnerable to job loss, medical bills, or unexpected expenses. To stay financially secure, you can follow the 6X Rule:

Set aside an emergency fund equal to six months of your essential expenses.

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Example

Let’s say your basic monthly expenses (excluding luxury spends) are ₹50,000, then for a 6-month emergency fund, you’d need around ₹3 lakhs.

Now, if you save ₹20,000/month, you’ll be able to build it in just 15 months.

Pro Tip: Keep this fund untouched in a sweep-in FD (5%–6.5%) or a high-interest savings account (2.5%–4%). It’s your financial airbag, only for emergencies, not everyday use.

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7-Day Rule

Before buying anything non-essential, wait 7 days.

This cooling-off period helps you avoid impulse purchases and ensures you're spending intentionally, not emotionally.

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Example

Let’s say Arjun is scrolling through Instagram and sees a stylish smartwatch for ₹6,000. He adds it to his wishlist, but doesn’t buy it immediately.

Instead, he waits 7 days and asks:

• Do I really need this?
• How have I managed without it?
• Is there a better use for this ₹6,000?

By waiting a week, Arjun realised the smartwatch was an emotional pick.

Pro Tip: Keep a wish list. If an item still feels worth it after 7 days, go ahead and purchase it guilt-free.

Final Thought

These aren’t strict formulas. They’re frameworks to help you spend smarter, save better, and reduce money stress.

Pick one. Try it for a month. Then tweak it to suit your life.

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