Last Updated on July 24, 2025 9:26:42 PM by Vivek Makwana
Learn How The 70 20 10 Rule For Investing Helps Manage Your Income Wisely. Save, Invest, and Repay Debt Easily With This Simple Money Management Formula.
📌 Introduction
💡 Want to take control of your finances and build wealth without stress? The 70/20/10 rule for investing is a powerful money management formula that can help you achieve financial success no matter your income level.
In today’s fast-paced world, most people struggle to balance spending, saving, and debt. That’s where this simple yet effective rule comes in. Whether you’re earning Rs15,000 or Rs1 lakh per month, this proven strategy teaches you how to divide your income wisely, invest with confidence, and avoid financial mistakes.
Managing money wisely is one of the most important life skills everyone should learn especially in today’s uncertain economic times. Whether you’re a salaried person, freelancer, student, or business owner, having a clear strategy to spend, save, and invest is essential.
One such simple and effective budgeting method is the 70/20/10 rule a financial planning formula that helps you control expenses, build wealth, and stay out of debt. 📊
In this blog, we’ll explain what the 70/20/10 rule is, how to use it with examples, and how you can apply it even in stock market investing.
In this post, you’ll learn:
- ✅ What the 70/20/10 rule actually means
- ✅ How to apply it with real-life examples
- ✅ How to use it in stock market investing
Let’s dive in and turn your income into a tool for long-term wealth and peace of mind. 💰📈
📌 What Is the 70/20/10 Rule?
The 70/20/10 rule is a personal finance strategy that divides your monthly income into three portions:
- 70% for living expenses (rent, food, utilities, transportation, etc.)
- 20% for savings and investments (SIPs, mutual funds, gold, PPF, etc.)
- 10% for debt repayments (loan EMIs, credit card bills, or emergency debt)
It’s an easy way to make sure you’re not overspending, you’re saving regularly, and you’re clearing your debts without stress.
🧠 Why the 70/20/10 Rule Is So Powerful
- ✅ Simple to follow — No need for complex finance knowledge
- 📉 Reduces debt — Keeps credit cards and loans under control
- 💸 Builds long-term wealth — Ensures you always invest monthly
- 🧾 Encourages budgeting — Keeps your lifestyle within your means
💡 What Is the 70/20/10 Rule Example?
Let’s say your monthly income is Rs60,000. Here’s how you would apply the 70/20/10 rule:
| 📂 Category | 💸 Amount (INR) | 📘 Purpose |
| 70% – Spending | Rs42,000 | Rent, groceries, electricity, petrol, dining |
| 20% – Investing | Rs12,000 | Mutual funds, SIPs, gold, PPF, RD |
| 10% – Debt | Rs6,000 | Personal loan, credit card, or clearing dues |
✅ This structure ensures that even if you spend Rs42,000, you’re still saving a solid Rs12,000 and reducing debt monthly.
Another Example:
If your income is just Rs20,000, even then you can start with this rule.
- Spend Rs14,000
- Invest Rs4,000
- Use Rs2,000 for any EMI or keep it for emergency
The key idea is it’s not how much you earn, but how consistently you manage that helps you grow.
📈 What Is the 70/20/10 Rule in Stocks?
Now, let’s apply the 70/20/10 rule specifically to stock market investing. You might ask: “Can I use this rule to build a portfolio?” Yes, you can!
In this case, the 70/20/10 principle helps you divide your stock market investments into different risk levels:
| 🧾 Segment | ⚠️ Risk Level | 🔍 Allocation | 📘 Example |
| 70% | Low to Medium Risk | Invest in Large-Cap Stocks or Mutual Funds | HDFC, Infosys, ICICI Prudential Mutual Fund |
| 20% | Moderate Risk | Invest in Mid-Cap Stocks or Sectoral Funds | Tata Power, Aditya Birla Sun Life Pharma Fund |
| 10% | High Risk | Invest in Small-Cap Stocks, IPOs, Crypto | Nazara Tech, Small-Cap Funds, Startups |
This approach reduces your market volatility exposure while giving you a chance to earn better returns.
📊 Portfolio Example Using the Rule:
Let’s say you want to invest Rs1,00,000 in the stock market. Here’s how to divide it:
- Rs70,000 in Safe or Stable Instruments (like blue-chip stocks or index funds)
- Rs20,000 in Growth Opportunities (like sectoral funds or mid-cap stocks)
- Rs10,000 in High-Risk Assets (like small-caps or IPOs)
👉 This keeps your portfolio balanced and you don’t put all eggs in one basket.
🛡️ Benefits of Using the 70 20 10 Rule For Investing
- Reduces Emotional Decisions
Helps avoid panic selling or risky over-investing. - Improves Risk Management
You know exactly how much to expose to riskier assets. - Creates a Balanced Portfolio
Long-term wealth building with short-term flexibility. - Perfect for Beginners
Easy to understand and apply, even if you’re new to investing.
💬 FAQs on the 70/20/10 Rule
Q. Is the 70/20/10 rule suitable for low-income people?
👉 Yes, even saving or investing Rs500–Rs1000 monthly builds the habit.
Q. Can I adjust the rule to 60/30/10?
👉 Yes, the rule is flexible. You can make it 60/30/10 or 50/30/20 based on your income and goals.
Q. What if I have no debt?
👉 Use the 10% for emergency funds or increase your investment portion to 30%.
🏁 Final Words: Make Your Money Work for You
The 70/20/10 rule is not just a budgeting trick it’s a mindset. In a world where expenses are rising and financial stress is common, this simple rule brings clarity and control to your money.
Whether you’re planning your first investment, paying off student loans, or aiming for early retirement this strategy helps you Spend Smart, Invest Smarter, and Live Debt-Free.
