Let me tell you about a rule that actually works. The 50-30-20 budgeting rule has been around for a while, but in 2026 India it needs a few tweaks. Here is what I think you should do with your money.
First, the basics. You split your take-home pay into three buckets. Needs get 50%. That means rent or EMI, groceries, transport, insurance, and utilities. The stuff you cannot skip. Wants get 30%. That is dining out, travel, subscriptions, and the fun stuff. Savings get 20%. SIPs, PPF, NPS, and your emergency fund. Simple, right?
Let me walk you through a real example. Say you earn ₹1 lakh a month after tax. Your Needs bucket gets ₹50,000. Rent in a decent area might eat ₹25,000. Add groceries, transport, and a basic health cover, and you are right there. Your Wants get ₹30,000. That is your Netflix, your weekend dinners, your short trips. Your Savings get ₹20,000. Maybe ₹10,000 in SIPs, ₹5,000 in PPF or NPS, and ₹5,000 toward your emergency fund. The math works if you stick to it.
Here is the part most people miss. Pay yourself first. I mean it. Set up your SIPs to run on the 1st or 5th of the month, right after your salary hits. Do not wait until the end of the month to see what is left. There is never anything left. Automate the 20% and live on the rest. Your future self will thank you.
Now, the elephant in the room. UPI and buy-now-pay-later have made spending ridiculously easy. You tap, you pay, you forget. There is no friction anymore. No counting cash, no feeling the wallet get lighter. That is dangerous. In my opinion, the only way to fight it is to move money out of your main account before you can touch it. Pay yourself first, remember?
One more thing. Lifestyle inflation is not the same as CPI inflation. The headline number might say 5 or 6%, but look at what actually hits your wallet. Medical costs are going up at 14% a year. Education at 10 to 12%. Weddings? Around 14% too. So when you plan for your kid's college or your own health in old age, do not assume 6% inflation. Assume double digits for those buckets. Your corpus needs to grow faster than you think.
The 50-30-20 rule is a starting point, not a prison. If you live in Mumbai and rent eats 40% of your pay, you might need to cut Wants to 25% and keep Savings at 20%. Or if you are early in your career, maybe you push Savings to 25% and trim Wants. The key is that 20% savings is the floor. Do not go below it. And automate it. Trust me on that.