There is a simple rule you can follow irrespective of your income, and the rule is called the 75/10/15 formula. It will enable you to save money and develop a wealthy corpus, irrespective of your earnings.
The first part of the 75/10/15 rule is that you won’t spend more than 75 per cent of your income. (Photo credit: Unsplash)
New Delhi: Everybody wants to be super rich and wants to have wealth like the ultra-rich people. There is a simple rule you can follow irrespective of your income, and the rule is called the 75/10/15 formula. It will enable you to save money and develop a wealthy corpus, irrespective of your earnings. The 75/10/15 rule is flexible and it works for different levels of income. There are three key principles to the rule: Spend, save and invest. Let us take a look at this rule which will make you rich.
75: The expenditure
The first part of the 75/10/15 rule is that you won’t spend more than 75 per cent of your income. Your overall expenditures including all your living expenses should be within 75 per cent of your earnings or even less, which will be better. The 75 per cent rule will enable you to make smarter choices with your money. You will look for cheaper alternatives and your focus will be on value. Rich people are always careful about their spending and they always find ways to save.
10: The cushion fund
The second part of the 75/10/15 rule is that you should save a minimum of 10 per cent of your earnings for what is known as a ‘cushion fund’. As the name suggests, it is an emergency fund on which you can fall back during times of need like a medical crisis, a job loss, or even a natural disaster. The ‘cushion fund’ should never be used for things like a vacation or a weekend spent on enjoyment.
There is a good rule of thumb which states to calculate your monthly expenses and multiply that by 5. For example, if Rs 1 lakh is your monthly expense, then Rs 5 lakh should be your cushion fund which will act as a safety net if something goes wrong. It is also important to keep the cushion fund in the right place. Instead of keeping it in a savings account, it can be invested in Fixed Deposits or Mutual Funds which give higher interest rates. Do remember after saving the cushion fund, you have to move on to the next step.
15: The investment for the future
The third part of the 75/10/15 rule means that you have to invest a minimum of 15 per cent of your earnings. Smart investment is a crucial way to expand your wealth. Instead of just relying on salary, you build assets that generate income for you over time. Rich people make most of their money from assets like investments, real estate, or even a business. It is crucial to start investing earlier in life to build a considerable amount of wealth.
Next Article
Follow us on social media
