Personal finance is a big question ever since Corona has hit the global economy. There are many who have been adversely affected due to the low profit figures of big corporates. Layoffs have become a trend and savings have gone low for many.
The answer is to this question totally depends on your financial situation. There are majorly three areas one must keeps funds for in his bank account:
Monthly expenses
Discretionary expenses
Emergency Fund
Corona virus has drastically impacted leading to a rise in our emergency funds. Even if you have funds, follow the below steps to understand the logic behind this simple calculation.
Plan your budget
We know how important is budgeting for corporates. Budgeting your personal finance is equally important and requires close watch. If you don't have one, use the following formula:
The 50/30/20 rule
Rule introduced by Senator Elizabeth Warren in the book "All your worth: The Ultimate Lifetime money Plan", it consists of dividing money into three buckets.
Fixed expenses form 50% of it. Rent, Electricity Bill, Internet etc. There is not much you can do about these expenses once you have finalised them as per your appetite. If you feel the fixed expenses eat up your money, you have 2 options to work on: Increase your income (or) reduce your fixed expenses.
Discretionary expenses make 30%. These cater to your wants and not your needs. Dinner date expenses, buying a branded shirt, watching movie at a multiplex etc. These expenses always have choices attached. There is always a cheap option to all these expenses, such as a local branded shirt, street food instead of restaurant, movie at a single screen etc.
Final 20% goes to Investment/savings. It can be a mutual fund (or) Fixed Deposit (or) shares (or) Bonds (or) Bitcoins etc. If you really intend to have a better future, never compromise with this 20% of your money.
How much cash in bank account ?
Now that the budget is set, your bank account must have a standing instruction for pushing your money into an investment fund. Rest must remain in your account such that it should give you a proper cushion. At the same time, it should not be so high that you get tempted to overspend.
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