Earning money can make one feel good by reinforcing their sense of being a productive citizen. However, once we have an income, we need to make choices about how much to spend today and how much to save for the future. While spending can be fun and give us instant pleasure, putting money away for the future may not be as exciting. Being overly frugal can take away the enjoyment of earning an income, but spending all of it can leave us vulnerable to life’s uncertainties.

Savings, if invested well, can help create wealth and provide us with more comfort in dealing with life’s challenges. Finding the right balance between spending now and saving for the future is personal and can be tricky. However, some thumb rules can help you figure out the right balance for you, such as the 25-50 rule.

The 25-50 rule suggests saving 25% of your current income and 50% of any increase or bonus that you receive. For instance, if your monthly take-home income is 40,000, you should save 10,000 (25%) of it each month, and if your salary increases to 50,000, you should save an additional 5,000 (50% of the 10,000 increase) per month, bringing your total savings to 15,000 per month. Additionally, if you receive a year-end bonus of 20,000, it is recommended to save 50% of the bonus, which would be 10,000.

This rule is a good guideline that allows you to save more as your income increases while still enjoying a good portion of your income. Saving more of your future income has been proven to be an effective technique to help build a sustainable savings habit.

It’s important to earn today, plan for tomorrow, and enjoy life today, while building a secure future. The 25-50 rule can help you achieve this balance and help you avoid long-term financial challenges.