Managing Money: 10 Rules To Follow To Ensure You Never Fall Short Of Cash

Managing money effectively isn’t just about how much you earn — it’s about how well you handle what you have. Just like we follow routines for health, fitness and work-life balance, having clear financial rules can help ensure that you never find yourself short of money.

Here are some basic money rules to follow for long-term financial security.

1) Prioritise saving before spending

One of the golden rules of financial planning is to treat savings as a non-negotiable expense. Before you even consider spending, set aside a fixed percentage of your income for savings. For young professionals just starting out, saving at least 10% of post-tax income is a good start, increasing it gradually to 15% as income grows. By your 40s, aim to save at least 35% of your post-tax income.

2) Follow a budgeting framework

Budgeting gives you control over where your money goes. A simple yet effective rule to follow is the 50-20-30 rule. Here, 50% of your income goes towards important expenses such as rent, utilities and groceries. After that, 20% should be dedicated to savings and investments. Finally, the remaining 30% can be used for spending, including entertainment and travel.

For major purchases, such as buying a car, follow the 20/4/10 rule. Pay at least 20% of the car’s price as a down payment, choose a loan tenure of no more than four years and ensure that your car loan EMI does not exceed 10% of your monthly take-home income.

3) Be mindful of spending habits

With the rise of digital transactions and auto-renewal subscriptions, it’s easy to lose track of small but frequent expenses. To avoid unnecessary spending, create a shopping list before making purchases. Then, allocate a specific day each week for online shopping to prevent impulse buys. Finally, regularly review your various subscriptions, such as OTT, and cancel those that are unused.

4) Build an emergency fund

Unexpected expenses can arise at any time and having an emergency fund ensures you’re not caught off guard. A rule of thumb is to have at least three to six months’ worth of living expenses saved in an easily accessible account. This fund acts as a safety net for job loss, medical emergencies or other unforeseen circumstances.

5) Start investing early

The sooner you start investing, the better you can benefit from the power of compounding, where your returns generate even more returns over time. Even small investments made early can grow significantly over decades. Investing in diversified assets such as stocks, bonds and mutual funds aligned with your risk appetite and financial goals can help build long-term wealth.

6) Secure your future with insurance

Life insurance is an essential financial safeguard, ensuring that your loved ones are protected in case of an untimely event. A good rule to follow is to have coverage that is at least 10 times your annual income.

7) Plan for retirement early

Retirement may seem distant, but planning for it early ensures financial independence in your later years. Many experts recommend accumulating a retirement corpus of 20 to 30 times your annual income. This gives you a target to work towards by calculating how much you need to save each year to achieve financial security post retirement.

8) Manage loans wisely

When taking a home loan, ensure that your monthly EMI does not exceed 30% of your post-tax income. Additionally, all loan EMIs combined (home, car, and personal loans) should be kept under 50% of your monthly income. Maintaining a credit score of 750 or above helps secure better interest rates and favourable loan terms.

9) Diversify investments smartly

Diversification is key to managing risk, but over-diversification can dilute returns. Ideally, four to six investment schemes are sufficient for a well-balanced portfolio. Rather than investing in too many funds, focus on a well-structured portfolio aligned with your risk tolerance, financial goals and investment horizon.

10) Keep learning and stay financially informed

Financial literacy is a lifelong journey, and the more you learn, the better you can manage your money. Understanding personal finance might seem overwhelming at first, but small, consistent efforts — like reading finance articles, listening to expert podcasts or watching educational videos — can significantly improve your financial acumen. Continuous learning would lead to informed decision-making and allow you to navigate financial challenges with ease.