₹1 Crore Wealth Formula: The 70-20-10 Rule Explained
Introduction
Getting financially independent and wealthy might be a far-off dream for most, but with the right plan, it’s well within your reach. One such plan is the 70-20-10 rule, a tried-and-tested formula for amassing wealth. In this article, we will explore in depth how this rule works and how you can apply it to create your own ₹1 Crore wealth.
If you’re willing to build wealth gradually and wisely, learning the 70-20-10 rule can become a gamechanger. This quick and easy formula for building wealth has been endorsed by financial wizards and is open to anyone with the goal to build significant wealth in the future.
Table of Contents
Understanding the 70-20-10 Rule
A. The Breakdown of the Rule
70-20-10 is a rule that allocates your earnings into three important segments to achieve the best wealth accumulation. This is how it is applied:
- 70% of your earnings go to living costs: This includes all your basic requirements such as rent, bills, food, transport, and other essential costs.
- 20% goes towards savings and investments: This amount is invested in growing your wealth in the long run, making you financially stable for the future.
- 10% is saved for debt repayment or charity: Repayment of outstanding debts or donation to charitable causes is a necessary step towards financial equilibrium.
B. Why This Rule Works
The 70-20-10 rule is effective because it’s realistic and practical. It urges you to stay within your means but invest in the future. Spending 70% of your income on everyday expenses means your life is going to be comfortable but not extravagant. And saving or investing 20% of your income is what gets you wealthier.
The 10% going towards debt repayment or charity also makes sure that you’re not just thinking about yourself but also being responsible when it comes to financial commitments or contributing to society. This provides a balanced and sustainable financial life.
Applying the 70-20-10 Rule to Achieve ₹1 Crore
A. Having Clear Goals for Your ₹1 Crore Goal
Before you start working on the 70-20-10 rule, you must have a specific goal in mind. Achieving ₹1 Crore might seem like a long shot, but with a plan, it’s a feasible goal. Here’s how you can make this goal more real:
- Divide your target into annual milestones: If you are going to save ₹1 Crore in 10 years, set a savings goal of ₹10 lakh annually. You can modulate it according to your current expenses and income.
- Carefully plan your investments: As you put 20% of your earnings into investments and savings, it’s also important to carefully select investments which are in accord with your purpose. Index funds, mutual funds, and stock are popular forms to invest for long-term.
B. Get the Most out of Your 20% Savings
The next step is ensuring you’re maximising your savings. Here’s how you get the most from the savings share:
- Set up a high-interest savings account: Your money should grow, even when you’re not actively investing. A high-interest savings account makes your money work for you.
- Diversify assets: Don’t put all your eggs in one basket. Invest your savings in stocks, mutual funds, bonds, and property. Diversifying reduces risks and increases opportunities for growth.
- Save automatically: Arrange automatic transfers to your savings and investment accounts
keep accounts each month. This will prevent you from diverting your
savings funds to spend as you see fit.
B. Get the Most out of Your 20% Savings
Another one of the most effective ways of adapting to the 70-20-10 lifestyle is efficiently optimizing your living expenses. To reduce your everyday spend, use these tips:
- Budget and manage your expense: Monitor each and every rupee you pay for. Have it tracked either via apps or simple spreadsheets for your spending.
subscription offerings, or on impulse buys. Small adjustments have the potential to save you
tons over time. - Budget for big-ticket items: Save up for large expenditures, like vacations or
home renovations, rather than paying for them with credit.
D. Paying Debt Off Effectively
The 10% of your income that you’ll pay back in debt should be used to pay off debts with high interest rates, e.g., credit card debt or personal loans. This is how you pay off debt effectively:
- Pay off high-interest debt first: Pay off high-interest loans before others to keep from bearing
the burden of compounding interest. - Consolidate debt: If you have several debts, consolidate them into a
a single loan at a reduced interest rate can make the repayment process simpler. - Snowball the debt: Pay off your smallest balances first to gain momentum, or
prioritize the largest debts in order to save money in interest. Select the approach that best suits you.
E. Philanthropy: Giving Back as You Grow
Yes, accumulating wealth is vital, but keep in mind that a part of the 10% are donations. Donating to something that speaks to your passions can provide purpose in the act of saving for wealth. What’s more, donations may qualify as tax-deductibles on your next filing.
Keeping a Check on Progress towards ₹1 Crore
A. Track Your Wealth-Building Strategy Frequently
Reaching ₹1 Crore isn’t a dash—it’s a marathon. Following the 70-20-10 rule consistently, it is crucial to check your progress periodically. Monitor your savings, investments, and expenditures at least monthly to stay on course.
B. Changing the Plan When Necessary
Life evolves, and so do your financial requirements. If you get a raise, inherit funds, or encounter unforeseen expenses, you may need to revise your 70-20-10 allocations. Review your goals periodically and adjust them if needed to remain on course.
Final Thoughts: The Power of the 70-20-10 Rule
A. Consistency is Key
Wealth is built over time and with hard work. If you stick to the 70-20-10 rule all the time, you can slowly build the wealth you require to achieve ₹1 Crore and more. Discipline and dedication to your financial goals are the keys.
B. Patience Pays Off
Keep in mind, this formula for building wealth is not about becoming a millionaire overnight. It’s about making gradual progress year after year. With patience and smart planning, you can reach your ₹1 Crore goal and create a financially secure future for yourself.
Quick Recap:
- 70-20-10 rule allocates your income between living expenses, savings, and debt repayment/charit
- If you stick to this plan, you can make gradual wealth build-up towards a *1 Crore goal.
- Effective investments, reducing unnecessary expenses, and debt management will assist you in achieving your goal.
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