What is the 50:30:20 Rule: Everyone dreams of buying their own house. Buying your own home is an emotional issue for people as it provides mental security to the people. However, as the prices of houses are increasing, it is not easy to accomplish this. It is also a huge financial decision for everyone. Many times people regret they bought the house ahead of time and many times they regret the delay. You also do not have to face all this, for this, it is necessary to imbibe the basic rules of personal finance.
So that many dreams don't have to be sacrificed
Buying a house requires a hefty amount and most people take a home loan for this. A home loan is a long-term loan and its EMI is also reasonable. If you are ready to pay a major part of your income in loan instalments for many years, then it is fine, but if your preparation goes wrong, then this decision can be heavy. This one dream of yours may sacrifice many dreams of your family. Let us know how to check your pocket before taking this important decision.
What does the 50:30:20 rule say
This is the thumb rule of personal finance. 50:30:20 means that you should spend 50% of your in-hand salary on essentials. These include expenses like utility bills, rent, EMI, and grocery purchases. After this, 20 per cent of the salary should be invested somewhere. Now the 30 per cent that remains, keep them for other unnecessary expenses. While taking any loan, keep in mind that your total EMI should not exceed 30% of your salary, otherwise you may get trapped in a debt trap.
Understand all math like this
Let us assume that your monthly income is Rs.1 lakh. Out of this, you will have to keep 50 thousand rupees for necessary expenses. With these 50 thousand rupees, you will also have to pay the EMI of the house. If your salary is Rs 01 lakh, then according to the 50:30:20 rule, your total EMI should not exceed Rs 30,000. Will invest 20 thousand rupees somewhere, while the remaining 30 thousand rupees will be kept for other expenses. Now if you can pay EMI of around Rs 30 thousand, then your home loan should not be more than Rs 35 lakh for 20 years, Rs 38 lakh for 25 years and Rs 40 lakh for 30 years.
