What is the 30-30-30-10 rule for retirement planning?

Retirement planning: Saving money for retirement is a crucial goal that many people strive for, but the process of getting started can be daunting. Fortunately, there are various strategies and techniques that can help you save more effectively if you incorporate them into your daily life. The 30-30-30-10 rule is one such approach that can assist you in building a substantial retirement fund.
The 30-30-30-10 rule helps you allocate a specific portion of your earnings each month. This percentage-based budgeting method sets a benchmark for expenses across various essential categories, according to an ET report.
To implement the 30-30-30-10 rule, you need to divide your income into four categories:
i) Allocate the first 30% of your earnings to housing costs.
ii) Use the second 30% for necessary expenses.
iii) Dedicate the third 30% to your financial goals.
iv) Reserve the final 10% for discretionary spending.
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Let's consider a practical example to understand how the 30-30-30-10 rule can be applied to save for retirement. Suppose your monthly income is Rs 50,000. Following the rule, you would allocate your earnings as follows:
i) The first Rs 15,000 will go towards housing costs such as rent or home loan EMI.
ii) The next Rs 15,000 will cover essential expenses like groceries, utility bills, and transportation.
iii) Allocate Rs 15,000 to meet your short-term and long-term financial goals.
iv) The remaining Rs 5,000 will be used for discretionary expenses like dining out or watching movies.
By dedicating a significant portion (30%) of your salary to investments and savings, the 30-30-30-10 rule encourages regular and disciplined saving habits.
If you invest this amount wisely in instruments that generate satisfactory returns, you can gradually build a sizable retirement corpus. Moreover, this systematic approach can help you achieve your financial goals more quickly by accelerating your wealth accumulation.