What is the 70/20/10 rule money?
The 70/20/10 Rule for Money Management
The 70/20/10 rule is a simple budgeting guideline to help individuals manage their finances effectively by dividing after-tax income into three main categories:
- 70% for Living Expenses: This portion covers all your regular monthly living costs such as housing, utilities, food, transportation, insurance, entertainment, and personal expenses.
- 20% for Savings and Debt Repayment: Set aside 20% for savings (such as building an emergency fund, retirement accounts, or other investment vehicles) and/or paying off existing debts like credit cards, loans, or mortgages.
- 10% for Giving or Charity: Allocate 10% of your income for donations, charitable contributions, or supporting community causes. Some people also use this portion for personal development or other discretionary spending.
Purpose: The 70/20/10 rule provides a straightforward framework to encourage disciplined spending, consistent saving, and generosity, making it easier for individuals to track and control their finances.