Understanding 70-20-10 Budgeting

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One of the first steps toward financial freedom is to create a budget. This 70/20/10 budgeting is the simplest way to manage your money per month. One technique of budgeting through percentage is to follow the 70/ 20/ 10 methods.

Switching to the 70:20:10 rule could remove a lot of the money problems if you’ve struggled with budgeting and how to dramatically cut spending. This article discusses using the 70/20/10 budgeting to consume, save, and invest for the future.

What is the 70/20/10 Money Rule?

This approach of budgeting entails setting a budget based on percentages. You’re dividing your budget into three categories:

  • 70% for outgoings
  • 20% for savings
  • 10% for tithe, investing and building wealth

The 70/ 20/ 10 finance rule applies either to income level and is adaptable enough to accommodate almost any payment plan. Until you get received weekly or monthly, you might utilize this 70/ 20/ 10 guideline to budget.

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How the 70/20/10 budget works

The accessibility of the 70:20:10 finance rule is its appeal. This is without a doubt one of the simplest budgeting solutions you’ll ever encounter.


This is how it works:

  • Divide your monthly take-home pay into three percentages: 70%, 20%, and 10%.
  • Use the percentage as a tool to spend, save (or repay debts), and invest.

Why use a budget percentages breakdown?

Budget percentage approaches are just one option for creating a budget. There’s also budgeting by paycheck, half-payment budgeting, and zero-based budgeting. These all function differently, but one thing is for sure: they all take a bit more effort than budgeting by percentages.

This is not required by the 70/20/10 budget guideline. Instead, simply calculate your percentages for each month based on your expected earnings.

How to Use the 70/20/10 Budget Rule

It’s intuitive the 70:20:10 rule. However, it will necessitate some preliminary research.

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Add up your monthly earnings

You ought to determine how much money you have to work with until you can start splitting it into percentages. This sums up all of the money you earn each month from the following sources:

  •        Wages
  •          Side jobs
  •          Business income
  •          Child support
  •           Alimony
  •          Government benefits
  •          Commissions, tips, or bonuses

Calculate your total revenue for those months by the number of months you choose. And there you have it: your monthly take-home pay average.

Make a list of where your money goes

Remember that the 70/20/10 strategy divides your funds into three buckets:

  •         Expenses
  •         Saving
  •         Tithing/investing

Expenses are all of the things you spend money on in a month. Otherwise, when it comes to starting applying that 70/ 20/ 10 rule, the budget percentage may not work.

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Divide up your income

It’s time to build your 70/20/10 budget now that you know how much you make each month or how much you regularly spend. That is, you must divide your money into each budget group.


Expenses (70%)

First and foremost, you must be able to live on 70% of your salary. 70% of your take-home pay, or net income after taxes, to be exact. As a result, you must include all of your essentials in this area, as well as any monetary pleasures.

Savings (20%)

The second group is significantly smaller than the first, yet it’s just as vital. You’ve set aside 20% of your total wealth in the 70 20 10 budget. While saving 10% of your income is better than nothing, boosting it to 20% gives you far more flexibility.

Tithing/investing (10%)

The final 10% of your money is set aside for giving in the 70-20-10 budget. This could include charitable donations or gifts to loved ones for occasions such as weddings and graduations.

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Scheduling can be made easier using a breakdown. The 70:20:10 money guideline is also very easy to follow. With the 70:20:10 plan, anyone can get out of debt, improve their savings, or simply worry less about money.


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