Will the 70-20-10 budgeting rule keep you stuck in the middle class? CA Nitin Kaushik shares his blunt wealth-building advice

A simple budgeting formula can make managing money feel easier, but CA Nitin Kaushik believes blindly following one popular rule could hold back wealth creation. The 70-20-10 approach suggests dividing income between essential expenses, savings and debt or other financial allocations. However, Kaushik argues that the reality for young professionals in Indian metro cities is very different. With rent, taxes and food costs eating into salaries, he believes early earners need to rethink traditional budgeting ratios.

CA Nitin Kaushik challenges the 70-20-10 rule

CA Nitin Kaushik took to X and warned that following textbook personal finance formulas without considering individual circumstances could be counterproductive. He specifically criticised blindly following the 70-20-10 budgeting rule, saying it could “keep you stuck in the middle class.”

According to Kaushik, the biggest problem is that such fixed percentages do not necessarily reflect the financial realities faced by young professionals living in India's major cities.

Why Kaushik says 70% may not be enough for expenses

Kaushik pointed to several costs that can quickly consume a large portion of an entry-level or starting salary. He highlighted high rent, income tax slabs and food inflation as factors that can push essential living expenses well beyond 70% of monthly income in Indian metro cities.

That leaves little room for someone to comfortably follow a rigid formula while also maintaining their existing standard of living. Instead of assuming that everyone can neatly fit their finances into predetermined percentages, Kaushik argues that people should first examine where their money is actually going.

Why he questions putting just 20% into savings

Kaushik also questioned the idea of automatically allocating only 20% of income towards savings. In his view, the early years of a career are particularly important for wealth creation because money invested earlier has more time to benefit from compounding.

He argued that allocating a relatively small portion towards savings while following an arbitrary 10% debt allocation can “delay real wealth creation.”The issue, according to Kaushik, is not simply how much someone saves but how early and consistently they put their money to work.

Kaushik’s alternative: Cut fixed expenses and invest more

Rather than following a rigid budgeting ratio, Kaushik suggested focusing on reducing fixed lifestyle costs. His advice is to “aggressively minimise your fixed lifestyle overheads” so that a larger share of income can be invested. He suggested aiming to invest 30% to 40% into high-growth assets, particularly during the early stages of a career.

The logic behind this approach is straightforward. If someone can keep recurring expenses under control, salary increases do not have to disappear into higher rent, bigger lifestyle expenses or other fixed commitments. More of the additional income can instead be directed towards investments.

Why early-career investing matters

Kaushik's argument places significant emphasis on the power of compounding. Someone who starts investing early has more time for their investments to potentially grow. Even relatively modest contributions can accumulate over long periods when returns are reinvested. This is why Kaushik believes a rigid savings percentage may not always be the best target. A young professional who has managed to reduce unnecessary fixed expenses may have the ability to invest considerably more than 20%.

On the other hand, someone dealing with high unavoidable expenses may not realistically be able to follow the same ratio.

Should you follow a fixed budgeting formula?

Kaushik's broader message is that personal finance rules should not be treated as universal formulas. The 70-20-10 approach may provide a basic framework for organising money, but individual circumstances can vary considerably. Housing costs, income, taxes, family responsibilities and lifestyle choices can all change how much someone can realistically save or invest.

For Kaushik, the priority is to avoid allowing lifestyle expenses to automatically rise with income. His advice is therefore less about memorising a percentage and more about creating enough financial room to invest aggressively while income is still growing.

The key, according to his X post, is to reduce fixed lifestyle overheads and use the resulting surplus to increase investments rather than simply allowing higher earnings to translate into higher spending.