An expense planner helps you track where your money goes and identify opportunities to save. The popular 50/30/20 rule suggests: 50% of income for needs (rent, groceries, EMIs, utilities), 30% for wants (dining, entertainment, shopping), and 20% for savings and investments. For Indian households, EMI payments often push the "needs" category higher, which is why tracking this breakdown is crucial to financial health.
Worked Example:
Monthly income = ₹80,000
Needs target = ₹40,000 | Wants target = ₹24,000 | Savings target = ₹16,000
If your EMI alone is ₹35,000 + rent ₹15,000 = ₹50,000 needs → Savings are squeezed → Rethink loan EMI
What is a healthy savings rate for India?▾
A savings rate of 20-30% of income is considered healthy. Most financial planners in India recommend saving at least ₹1 lakh per year minimum. For early retirement goals (FIRE), you need 40-60% savings rate. Start with whatever you can manage and increase by 1% every 6 months.
How do I reduce expenses if I'm overspending?▾
Start by tracking for 1 month, awareness alone reduces spending by 10-15%. Then target the biggest discretionary items: food delivery, subscriptions, impulse shopping. EMIs are harder to cut but refinancing at a lower rate helps. The "needs" category is usually fixed; attack the "wants" category first.
How much emergency fund should I maintain?▾
3-6 months of monthly expenses in a liquid account (savings account or liquid mutual fund). For example, if your monthly expenses are ₹40,000, keep ₹1.2-2.4 lakh as emergency fund. Don't invest this in equity, it must be instantly accessible.
How much of my income should go towards EMIs?▾
Lenders and financial planners typically use the 40% rule, your total EMIs (home, car, personal loans combined) should not exceed 40% of your monthly take-home income. Going beyond this squeezes your "wants" and "savings" categories and leaves little room for emergencies. If your EMIs already exceed 40%, prioritise paying off the highest-interest loan first.