Everyone in Pakistan seems to be struggling with money, constantly living in a state of distress and uncertainty. One of the main causes for this is the lack of education that prevents us from taking the steps needed to succeed economically.
There are several tools and rituals that one can follow to start their journey of organized expenses, one of the tried and tested being the 70-20-10 rule.
It’s a simple and easy-to-follow way to sort out your after-tax income into three portions, building the roadway to financial excellence!
We can implement this rule in our daily lives by allocating:
70% to essentials
Calculate your total net income after subtracting the taxes, simply multiply it by 0.70 and put that amount aside to fulfill your basic necessities.
Make a proper list so you do not overspend on impulse and remind yourself to only use this money for the things that you can absolutely not go without, them being:
- Housing: The dreaded monthly rent that looms over us. Getting it out of the way first will do wonders to take some weight off.
- Food: Remind yourself to be cautious while shopping by always looking out for deals and discounts, but not to the extent that you start hoarding items that don’t even align with your storage.
- Transportation: Try to decrease the consumption of fuel by walking if the distance is short, and if you have to fill up, try to keep in check with the prices when you do so to save money.
- Utilities: Bills, including water, gas, electricity, internet, etc. Again, try to decrease the consumption of these sources as much as possible.
20% to wants
This is the most flexible portion since you decide where to use it! However, don’t let yourself get too excited and spend your money on things that have no meaningful purpose. Remember, wants are the things that you could probably go without if you had to.
Tell yourself truthfully that when you use up this money, it’s gone. This will remind you to stay mindful, even allowing you to put some money aside for savings.
These wants can include:
- Subscriptions: Netflix, Disney+, Spotify, YouTube, and more. These companies do a splendid job of luring us in, don’t they?
- Takeaways and dine-ins: A little treat for yourself on days when cooking from scratch is just too much work.
- Gifts: An unexpected wedding invitation or a relative’s birthday you completely forgot about, it’s always better to stay prepared.
- Clothing: Firm reminder to only spend more on clothes after properly decluttering through what you already have, so you can prevent buying the same piece of clothing for the third time!
10% to savings & debt payments
With the current state of salaries in Pakistan, we know well that there is not enough money to pay off debts AND set some aside for savings at the same time.
It’s unrealistic to think that we can use just 10% of our income to cover all of our side feats, but even trying to fill one of those spots every month will make a huge difference.
On the months where we have debt accumulating, we can put the entirety of the 10% in taking it off, and on the months where there is not any/ less debt, we can consider putting the 10% into savings!
Things to Consider
Track your spending
Monitor your finances regularly so that you’re always connected with your finances and are not going beyond your allocated percentages. It’s all about gaining control in the most organized and easy way possible.
Automate your savings
Put technology to good use by setting up automatic transfers to your savings or investment accounts every month. This will ensure that you stay consistent and will conveniently sort out your income for you!
Adjust as needed
Fluctuating salaries, unstable living expenses, and inflation are all part of the Pakistani experience, so instead of getting overwhelmed by the waves, we need to learn to ride through them and adapt different strategies to survive in this economy.
CONCLUSION
The 70-20-10 rule is a versatile tool that can be molded to fit any individual’s lifestyle, and if we learn to use it properly, it can lead us to fulfill all our economic goals while making sure that we don’t drown in debt.
Moreover, by using this method you can efficiently budget a salary of 50k or more. Just know that flexibility is extremely important to keep in mind while applying this rule. It’s okay to make some adjustments as long as they are not permanently harming the financial cycle.
So take the initiative, use the budgeting sheets, and enhance the functioning ability of your salary starting today, because it’s always better late than never.
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