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Mastering the 30:30:30:10 Rule: A Guide to Effective Retirement Planning

The 30:30:30:10 income and retirement rule provides you with a strategy to manage and invest your funds without compromising your current financial needs. Want to know more? Read ahead.

  • 5,900 Views | Updated on: Mar 18, 2024

Are you also struggling with managing finances? Or run out of money by the end of the month? If yes, then this blog will help you manage your finances in a better manner by throwing light upon the 30:30:30:10 rule.

By investing and saving funds as soon as the beginning of regular income, you can get the maximum benefit by the age of retirement. Not just this, proper management of income gives you a buffer in a life full of hills and valleys. To understand the rules of saving and investment, you must read ahead.

Getting Ready for the Future

Better planning of funds is essential for bringing stability to life. Hence, it is said to start planning early in to reap the maximum benefits. However, most people struggle to manage their monthly income and can hardly save anything for future uncertainties. To solve this vicious cycle of income and expenses, you must have a look at the 30:30:30:10 rule, which is among the best retirement investment plan.

30:30:30:10 Rule for Retirement Investment

Long-term saving and investment are crucial for financial well-being, especially post-retirement, which restricts the source of income. The retirement saving 30:30:30:10 rule helps you invest income in an organized manner. It suggests investing 30% of savings into stocks, 30% in bonds, 30% towards real estate, and the remaining 10% in cash and cash equivalents. This gives birth to a balanced financial portfolio.

30:30:30:10 Rule for Income

Better management of finances helps you live a smooth life. Thus, it becomes important to prioritize your income. According to the 30:30:30:10 rule, you must devote 30% of your income to housing (EMI’S, rent, maintenance, etc.), the next 30% to needs (grocery, utility, etc.), another 30% to your future goals, and spend rest 10% on your “wants.”

For example: If you earn ₹1,00,000 per month, you should not spend more than ₹30,000 on EMI or rent of a house. The other ₹30,000 is on grocery and personal needs. The remaining ₹30,000 will be on future goals, and the remaining ₹10,000 will be on luxury or wants.

Plan Your Way

Before starting retirement planning, you must take into account the financial situation, goals, risks, and time horizon. There is no one size fits all plan for financial planning, as everyone’s financial situation and goals are different. General financial rules can provide you with a starting point, but for long term, you must adjust the plan according to your needs and circumstances. Therefore, a dynamic retirement plan is important that can be modified with time and situation.

However, retirement planning is a continuous process and not a one-time event. Hence, you must change planning with the change in income, expense, and market condition.

Benefits of 30:30:30:10 Rule

The 30:30:30:10 rule provides a base for long-term investment without compromising your current financial requirements. Here are a few benefits you can get by following the rule:

Usage of Funds

If you are investing your funds properly, you will have a financial buffer throughout your life. you can utilize the money in case of medical or financial emergencies in the family. Thus, an investment made toward the future never gets wasted.

Better Management of Finances

The 30:30:30:10 rule helps you manage your finances in a better way by allocating the percentage of income based on the priorities of life. This is one of the simplest ways to save and manage your income.

Diversified Portfolio

The rule of 30:30:30:10 for long-term investment allows you to invest your money in different investment options, such as stocks, government bonds, mutual funds, etc. By doing so, you eliminate the risk of major losses.

To Sum Up

There is no single great financial plan, as it depends on the individual’s financial goal, annual income, and circumstances. However, the 30:30:30:10 rule is one of the basic rules that can be followed by anyone who has started earning. It helps you build a consistent habit of investment which is useful for having financial stability.

    Key Takeaways

  • Defining the financial goal is the first step toward retirement planning.
  • Early investments reap the maximum benefits post-retirement.
  • There is no one size fits all plan for financial planning, as everyone’s financial situation and goals are different.
  • A diversified investment portfolio is important to eliminate the risk involved with the investment.
  • Dynamic investment plan helps you modify your investment according to your current income and situation.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors