An expense is everything that you spend money on. Rent, electricity bills, education, medical bills, insurance, food, petrol, emergency expense. Anything and everything that you spend money on.
Here is how you execute the 70% rule
Let’s assume that your average monthly inflow into your account, also called income, is INR 50,000.
70% of this amount comes to INR 35,000. So your total spending in a month across all items – Rent, EMI, petrol, insurance, food, grocery, movie, dining out etc needs to be below INR 35,000.
Please note that 70% is the maximum. The lesser you spend below 70% the better off your family will be.
The first thing you need is a complete description of all your spending done over the last 6 months. Everything means everything. If you spent through a card or other digital means then this information will again be available in the “Track your income and Expense” section of the Saveabhi app. ATM withdrawal should help you consolidate your cash expenses. Now divide this total by six to get a real monthly average.
Now categorize this expense into categories like rent, shopping etc. Again the category wise data is already available on SaveAbhi. If the categories for certain expenses is not provided then you have the option of changing it manually.
Now, look at the total monthly average. Is it above 70%? You need to start looking at the discretionary categories above and cut down all non-essential spending and look at the number again.