10-30-50 rule explained: Edelweiss CEO Radhika Gupta offers guide to building wealth for young professionals; advises automating savings and investing smartly
NEW DELHI: For many young professionals, saving money can feel like a juggling act between bills, loans, and lifestyle choices. But Radhika Gupta, MD and CEO of Edelweiss Mutual Fund, offers a fresh perspective in her new book ‘Mango Millionaire.‘ She compares saving to cricket net practice: the discipline you build while saving sets the stage for successful investing later.โJust as no player would dream of walking into a match without net practice, no investor can hope to succeed without first mastering the art of saving. Saving trains discipline, while investing becomes the real game where goals are scored and wealth is built,โ Gupta explains, as reported by ET.
The 10-30-50 Rule : A stepwise approach to wealth
Guptaโs book introduces the 10-30-50 rule, a step-by-step framework to build lifelong wealth. The system recommends saving 10% of income in your twenties, 30% in your thirties and forties, and 50% after your forties.
- Phase 1 (20sโ30s): The 10% foundation
โBetween twenty to thirty years of age, you can safely aim to stow away at least 10 per cent of your income,โ Gupta advises. She acknowledges the challenges young professionals face: โSalary packages or earnings are comparatively lowerโฆ certain movies must be watched in theatres, where the popcorn costs more than the tickets.โ Her advice for beginners: start small, even with just 1%, and gradually increase over time. - Phase 2 (30sโ40s): The 30% acceleration
โBetween your thirtiesโforties, your money inflow will increaseโฆ start saving at least 30 per cent of your income around this time,โ she says, highlighting promotions, career growth, and business expansion as opportunities to boost savings. - Phase 3 (40s+): The 50% wealth sprint
โBy the time you are on the other side of the big F, your forties onwards, you’ll be earning at your peak potentialโฆ try to save at least 50 per cent of your income at this stage,โ Gupta adds, noting expenses like childrenโs education and retirement planning.
Savings deducted at source: The SDS hack
Gupta draws inspiration from the TDS (Tax Deducted at Source) system, proposing a Savings Deducted at Source (SDS) model.“Any system which is automated or mandated becomes difficult to bypass. For example, the process of TDS or Tax Deducted at Source, makes it challenging for taxpayers to evade taxes by making the mandatory deductions before the money hits your bank account,โ she said, as quoted by ET.
Habit over numbers
Gupta stresses that the key to wealth creation is habit, not just the percentage of savings. โSavings is a habit-driven approach. Initially, forming the habit of saving is more important than the percentage of money you save,โ she says.