The 70-20-10 Budget Rule: How To Finally Balance your Budget
Ever feel like your salary disappears the second it hits your account? I can relate.
One minute you’re feeling rich, the next you’re scraping together coins to grab a coffee. Or worse, you’re worrying about whether you can manage to afford every essential before your next pay day.
That’s where budgeting comes in. It doesn’t have to be about spending hours doing the numbers and forcing yourself to buy nothing at all.
It works because it’s about setting up a simple system that gives your money a job before it runs off and spends itself.
Paying attention to my budget and creating a system is the only thing that finally brought my spending under control. I went from having nothing in savings to finally building an emergency fund and investments.
Let me introduce you to a budgeting method that’s ideal for beginners (and, for anyone wanting to feel more in control): the 70-20-10 rule.
What Is the 70-20-10 Budget Rule?
The 70-20-10 rule is a super straightforward way to split up your monthly income into three buckets:
- 70% for living expenses
- 20% for wants
- 10% for savings and investments
That’s it. No complicated formulas, no “cut out all lattes” nonsense. Just a realistic, flexible way to manage your money without losing your mind.
It’s similar to the 50-30-20 rule, although obviously the proportions of how income is divided up is a little different. I prefer 70-20-10 because I think it is more realistic given the cost of living crisis we find ourselves in today.
Why It Works
Most people spend first, then try to save whatever’s left. Spoiler: there’s never anything left – I certainly never had anything left anyway.
The 70-20-10 rule flips that around. It forces you to plan where your money goes and ensure some money is allocated to your savings.
Why bother saving? Because you are putting money aside for the months when unexpected expenses come up, such as a boiler repair, or the things you want in the future – like a dream holiday, a replacement car or a new home.
Budgeting will not always go to plan. Some months you will overspend on expenses due to unforeseen circumstances. And that is not a failure! That’s life. The point of allocating money to your savings is that you can manage when those months hit.
The great thing about this budgeting rule is that it’s flexible enough to work whether you’re just starting out, living paycheck to paycheck, or finally feeling a little financial breathing room.
How 70-20-10 works
Here’s a break down of how this works in practice.
70% – Your Everyday Spending
This is the chunk of your income that covers everything you spend money on in a typical month.
We’re talking:
- Rent or mortgage
- Utilities (water, electricity, internet)
- Insurance (car, health, life)
- Groceries
- Fuel and transportation
- Essential clothing
- Childcare
- Phone bill
- Minimum debt payments
Some people lump their essentials in with their wants in the 70-20-10 rule. I personally opt not to do this because I think many budgets struggle to cover both wants and essentials with 70% of their income.
BUT if you do want to do a variation of this, especially if you have large debts to repay, you could try this instead:
- 70% for living expenses and wants
- 20% for savings and investments
- 10% for debt repayment
Tip: Want to get even more clarity? Try splitting this into fixed expenses (the same every month, like rent) and variable expenses (like groceries or entertainment).
20% – Wants
- Netflix, gym, or other subscriptions
- Dining out and takeout
- Clothes
These are all of the things you don’t really need but that make you enjoy life. Understanding how much 20% of your income is can help you to prioritise these things.
You’ll cut back on the subscriptions you hardly use to ensure you can cover the ones you actually do.
10% – Investing and saving
This is your future-you fund. The 20% bucket helps you stop that paycheck-to-paycheck cycle and build real financial security.
Depending on where you’re at, this might include:
- Emergency fund
- Retirement savings
- Sinking funds (for Christmas, car repairs, travel)
- Paying off high-interest credit cards or loans
- Saving for a house or a big purchase
- Stocks or ETFs
Quick win: If you don’t have an emergency fund yet, aim to save $1,000 first. After that, work toward 3–6 months of living expenses.
If you’re drowning in debt, it’s okay to shift this bucket more toward debt payoff at first. There’s no “one right way” here.
Example of 70-20-10 in action
Let’s say your take-home pay is $3,950/month (which is about average in some major cities). Here’s what a 70-20-10 budget might look like:
70% Needs – $2,765
These are your essential expenses—stuff you can’t really live without (or would be very hard to cut entirely).
- Rent: $1,600
- Utilities (electricity, water): $150
- Groceries: $400
- Phone: $60
- Transportation (fuel, public transport, etc.): $50
- Insurance (health, car, etc.): $200
- Minimum debt payments: $200
- Medical/prescriptions: $105
20% Wants – $790
This is your fun/flexible/lifestyle category—things that make life enjoyable but aren’t strictly necessary.
- Dining out & takeout: $200
- Entertainment (movies, subscriptions, outings): $150
- Clothing & personal care: $120
- Travel sinking fund: $120
- Gifts & special occasions: $100
- Hobbies/fun money: $100
10% Savings & Investing – $395
This is money for your future—whether you’re saving for emergencies, retirement, or investing to grow wealth.
- Emergency fund: $100
- Stock investments/retirement: $250
- High-yield savings (short-term goals): $45
How to Start Using the 70-20-10 Rule (without the overwhelm)
Here’s how to get going, step-by-step:
1. Know your income
Figure out what you actually bring home each month after taxes and deductions. This is your starting point.
2. List your expenses
Track what you currently spend. Go through bank statements, apps, or just jot down rough numbers. You can’t budget what you don’t understand.
A budgeting spreadsheet can really help you here. Be realistic about your variable spending on things like shopping and going out to – check out three months of spending and work out an average spend.
3. Allocate your income
Divide your take-home pay using the 70-20-10 split. Use a budget template, spreadsheet, or pen and paper—whatever works for you.
4. Track your spending
This is where the magic happens. Monitor your spending throughout the month to see where you’re on track (or going off course). Budgeting isn’t set-it-and-forget-it—it’s a living document.
Sometimes you may go off course and that is OK, tracking it helps you see this and make decisions on how to bring things back under control.
5. Adjust as needed
Can’t save a full 10% yet? That’s okay. Start with what you can do, then tweak as you go. The goal is progress, not perfection.
And as you earn more, you may be able to increase how much your invest or save as a percentage. For example, maybe your needs will go down to 60% of your income, then you can add that extra 10% into your savings allocation.
Is the 70-20-10 Budget Rule Right for You?
This method is perfect if you:
- Are new to budgeting
- Want a super simple system
- Prefer flexibility over strict categories
- Are ready to stop the paycheck-to-paycheck cycle
- Want to prioritise saving and giving/investing
It might not be ideal if you:
- Need more detailed budget categories
- Struggle to live on 70% of your income
And remember: no budget is one-size-fits-all. The best budget is the one that works for you—and gets you closer to your goals.
Final Thoughts
The 70-20-10 rule is like budgeting with training wheels. It gives you a broad framework to make sure the important stuff gets covered.
Whether you’re trying to get out of debt, build your savings, or just feel a bit more in control, this method is a great place to start.
Want to get started with budgeting? You can get my free printable budget sheet to get started.
