ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The idea is to follow the “Income – Savings = Expenses” principle, which requires you to develop the discipline to save first before spending. When you set aside money from the get-go, magic happens. You learn to work with the money you have, while the rest is safely stored in your savings.

Detailed explanation-2: -Saving is the portion of income not spent on current expenditures. In other words, it is the money set aside for future use and not spent immediately.

Detailed explanation-3: -Income – Savings = Expense By rearranging, we are essentially prioritizing savings over spending. This literally means, the moment we draw our salary, we first divert the funds towards savings and spend whatever is left after saving.

Detailed explanation-4: -One of the most common percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings.