Bad times can knock at your door anytime without any warning. Losing a job, a medical emergency, or a sudden big expense, these are the problems that can break the financial back of any middle-class family. In such a situation, people often either take a loan at high interest or are forced to beg in front of someone. But imagine if you have such a 'financial shield' that can save you from these problems? Yes, it is possible! But for this, you should already have an emergency fund. Here is the formula of 67:33, which can quickly create a good emergency fund for you. Know how this formula will work wonders.

What is the miraculous formula of 67:33?

This formula is a very easy and effective way to manage your money. For this, you have to divide your total monthly income (in-hand salary) into two parts - 67% and 33%. You can use 67% of your savings for all the essential expenses like house rent, ration, bills, children's fees, travelling, and other lifestyle-related expenses. You can use 33% for savings and investments. This is the magical part that will secure your future.

Let's understand with an example.

If your monthly salary is Rs 50,000, then according to the 67:33 formula:

67% = Rs 33,500 (You will use this for your monthly expenses)

33% = Rs 16,500 (This will be your monthly savings, which you have to invest for an emergency fund)

Bad times can knock at your door anytime without any warning. Losing a job, a medical emergency, or a sudden big expense, these are the problems that can break the financial back of any middle-class family. In such a situation, people often either take a loan at high interest or are forced to beg in front of someone. But imagine if you have such a 'financial shield' that can save you from these problems? Yes, it is possible! But for this, you should already have an emergency fund. Here is the formula of 67:33, which can quickly create a good emergency fund for you. Know how this formula will work wonders.

What is the miraculous formula of 67:33?

This formula is a very easy and effective way to manage your money. For this, you have to divide your total monthly income (in-hand salary) into two parts - 67% and 33%. You can use 67% of your savings for all the essential expenses, such as house rent, ration, bills, children's fees, travelling, and other lifestyle-related expenses. You can use 33% of your savings (for savings and investment). This is the magical part that will secure your future.

Understand it with an example.

If your monthly salary is Rs 50,000, then according to the 67:33 formula:

67% = Rs 33,500 (you will use this for your monthly expenses)

33% = Rs 16,500 (this will be your monthly savings, which you have to invest for an emergency fund)

How much should your emergency fund be?

People are often confused about how much their emergency fund should be. According to financial experts, your emergency fund should be at least as large as to ensure that even if your source of income suddenly stops, you can comfortably run your household expenses for 6 months to 1 year.

If your monthly household expenses (which you have decided from a 67% share) are Rs 33,000, then your goal should be to create a one-year emergency fund. One year emergency fund = Rs 33,000 / month x 12 months = Rs 3,96,000 (about Rs 4 lakh). This amount will help you maintain your standard of living without any worry in case of job loss, illness, or any other crisis.

How to create an emergency fund faster?

Proper use of bonuses and incentives

Instead of spending the annual bonus, incentives, or any other additional income received in the job, put it directly into your emergency fund investment. This will act as a booster for your fund.

Review expenses
Review your 67% expenses every few months. See if there is any unnecessary expenditure that you can reduce to increase your savings.

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Increase savings as income increases.
Whenever your salary increases, add a large part of the increased amount to your SIP. This will grow your fund faster.

FAQs
1: Where should emergency fund money be invested?
The main objective of an emergency fund is security and immediate liquidity when needed, not very high returns. Therefore, it is best to keep it in Liquid Funds, Short-Term Debt Funds, or a high-yield savings account, where there is no lock-in period and you can withdraw money in 1-2 days.

2: Can I use this 33% savings for other goals?
Your priority should be to create an emergency fund. Once your 6-12 month fund is ready, you can invest this 33% savings in different investment plans for your other financial goals like retirement, children's education, or buying a house.

3: What if I can't save 33%?
If your expenses are high and it is difficult to save 33%, don't be discouraged. Start with 15-20% and try to increase your savings gradually. The important thing is that you develop the habit of saving and investing.

4: Which situation should be considered an 'emergency'?
Only situations like losing a job, a serious medical problem, or urgent repairs in the house should be considered an emergency. Do not use this fund for vacations, buying gadgets or fulfilling hobbies.
 

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