ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The 50/30/20 rule of budgeting is a simple method that helps you manage your money more effectively. This basic thumb rule is to divide your post-tax income into three spending categories – 50% for needs, 30% for wants, and 20% for savings.

Detailed explanation-2: -One of the most quoted rules of happiness is the 50-40-10 rule. This knowledge about happiness states that 50% of our happiness is determined by genetics, 10% by our circumstances and 40% by our internal state of mind. This rule originates from the book “The How Of Happiness” written by Sonja Lyubomirsky.

Detailed explanation-3: -The rule is very simple in practice. It asks you to break your in-hand income into three parts. 50% of the income goes to needs, 30% for wants and 20% to savings and investing. In this way, you will have set buckets for everything and operate within the permissible amount for each bucket.

Detailed explanation-4: -He calls his method the rule of 30, whereby one allocates 30% of their pre-tax income towards retirement, mortgage, and large short-term expenses (like daycare) combined. He then uses the remainder of the book to stress test the assumptions of the method against historical and future worst case scenarios.