In today’s time, the trend of buy now, pay later is increasing rapidly. Everything from mobile to car and home is available on easy EMI. Small installments may seem very light in the beginning, but if there is not proper planning, this facility can gradually turn into a huge loan. In such a situation, finance experts recommend adopting the 2-6-10 rule, which can accurately check your financial health before taking EMI.
What is the 2-6-10 rule?
This is a simple formula, which tells whether a product or loan is suitable for your income or not. If this rule is followed then unnecessary debt can be avoided.
meaning of ‘2’
The first part of the rule says that the total price of the thing you want to buy on EMI should not be more than half of your one month salary. Suppose your salary is ₹ 50,000, then it would not be wise to buy a mobile phone more expensive than ₹ 25,000. Especially the prices of electronic goods fall rapidly. Its value reduces significantly within a year. In such a situation, spending too much on expensive gadgets can be financially harmful.
meaning of ‘6’
The second rule says that the EMI tenure should not exceed six months. Long installments of 18 or 24 months keep you in debt for a long time. Additionally, longer tenure means higher interest. With short EMIs, you can become debt free quickly and be prepared for future financial needs.
meaning of ’10’
The third and most important rule is that your total monthly EMI should not exceed 10% of your in-hand salary. For example, if your salary is ₹40,000, your EMI should not exceed ₹4,000. This keeps the monthly budget of the house balanced and does not affect the savings.
Why is this rule necessary?
Experts say that the habit of easy loans can gradually increase financial pressure. Many people take on a big responsibility by adding small EMIs, which impacts their savings and emergency fund.
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