What is the 70/20/10 budget (and does it work)?

What is the 70/20/10 budget?

What is the 70/20/10 budget (and does it work)?

Disclosure: This post contains affiliate links, which means I earn a commission at no expense to you. Affiliate links are marked with the asterisks (*)

There are different types of budgets out there, and one of them is known as the 70/20/10 budget. What is it, and will it work for you?

With the way the economy is going, you need to find a way to budget. There are different ways depending on the money you have, the outgoings you have, and what you have planned in the future.

One of the ways to budget* is known as the 70/20/10 rule. This is very similar to the 50/30/20 budget that I looked into a while back. It follows the same principles, and it might be the one for you with the current way of the economic world.

What is the 70/20/10 budget?

This budget breaks up the way you will spend or save your money. The first 70% of your paycheck goes on necessities, like your rent, your utility bills, and your groceries. It can also include some discretionary spending, but if you are struggling financially, you’d probably want to cut some of that out or at least heavily down.

The next 20% of your paycheck will go to investments and savings. You want to make sure you have something for the future, and you need to build up your emergency fund.

The final 10% goes to debts. Now I have seen people switch the 20% and 10% around so that the debt is cleared faster. If you do have a lot of debt, I would suggest you do that too. We’ll get into that.

Does this type of budget work?

It’s always hard to answer this question. Any budget works as long as you stick with it. The question is whether you will stick with it. There’s no point setting a budget that you have no intention of following.

This budget also works if you are struggling with the higher cost of living right now. While you want to be at a point where you’re only spending 50% on necessities and wants, the high cost of rent or the mortgages going up due to interest rates going up isn’t necessarily making that possible. You need to push to the 70% mark.

Remember that the 70% mark is also including your discretionary amounts. In the 50/30/20 budgeting rule, the 30% is for the wants. You’re putting less into the savings and the debts. You may find that you don’t have the money available for all of that because your rent is eating up half of your paycheck. There are so many people there, so please do not feel bad for it.

Part of the 70/20/10 budget that may not work is the way the savings and the debts are split. If you do have a large amount of debt, I’d encourage you to work on that before putting a lot into savings. Yes, you want to save for the future and yes, you need an emergency pot, but you’re paying a lot of interest on your debts.

What if the minimum payments on your debts* are higher than just 10% of your paycheck? You need to pay more, and that needs to come out of somewhere. Is it going to be necessities or savings? For a lot of people, it has to come out of savings. You don’t want this to happen for too long, though, so do look for ways to change that around. The faster you’re out of debt, the faster you’ll be able to save for the future.

Once you are out of debt, you need a plan for that other 10% of your paycheck. I highly recommend putting it into the savings and investments rather than the necessities and wants.

MORE: How much of your paycheck should you save?

Which type of budget are you following? Let me know in the comments below.

Alexandria Ingham is a professional writer. She predominately ghost-writes in various niches, including fitness, finance and technology Everything is fully researched and well-written. Under her own name, she writes in the technology, business, history and weight loss niches

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top