How much money you should save every month? 50/30/20 Rule

Saving money is a good habit and it is essential for our life. Everyone should make a budget of expanse and save at least the money from their monthly income.

There is some rule which helps you to understand the concept of saving. you can save money easily whether you are a businessman, entrepreneur, employee, student, or housewife. 

This is valid for all.

50/30/20 RULE

According to this rule, 

First, divide your income into three parts, no matter how much you earn.

50% - For essentials like rent and food

30%-  For discretion spending

20% -  For saving

For high earners,

Expanse low and save a large percentage of income 

For low earners, 

Keeping something is better than nothing

If you want to retire early then there is a most famous principle you should know.

4% Rule of retirement / safe withdrawal rate 

The formula for financial independence;

[annual expenses<=4% of total investment]

save and invest 25x of your annual expanse = financial independence 

It's only a guideline.

For retirement,

you only need 25 times your annual expenses, not your income to become financially independent.

here is verified proof,

example:-

Monthly expanse = 5000

Annual expanse  =  60000

so we need = 60000*25 =1500000

if we get only a 4% return with savings and investment,

1500000*4% =60000 rs (annual for monthly expanse)

How to make 25X from savings 

Monthly deposit =25$

Annual interest(monthly compound) = 2.5%

Number of years = 40 yrs

Total contribution = 12000$

Interest earned = 8585$

final saving = 20585$

If you earn = 125$

save 20% for 40 yrs = 25$/month

then you can retire and become financially independent.

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