I Tried the 70-20-10 Rule, and Now I’ll Never Look at My Budget the Same Way
As a planner and lover of list-making, I’ve always been totally on board with budgets. But since the demise of Mint last year, I’ve definitely lost a little bit of control over understanding where my money is going each month. Currently I use Simplifi for budgeting, but I feel my sense of how much I’m spending has turned into a guessing game.
So when I found out about the 70-20-10 budgeting rule, I was excited to give it a try — especially if it meant an excuse to take a step back and assess whether my restaurant spending is spiraling or if I actually should splurge on the new coat I want this fall.
Here’s what you need to know about this budgeting rule that’s going viral on TikTok, how it looks in real life, and whether it might work for you.
What Is the 70-20-10 Budgeting Rule?
The 70-20-10 budgeting rule is a new take on a longstanding budget ratio, and it’s taken off on TikTok as of late. In the original budgeting rule, which was 50-30-20, 50% of your money went to needs, 30% went to wants, and 20% went to savings.
However, that’s not always realistic — especially with skyrocketing monthly housing payments across most major metropolitan (and even non-major metropolitan) housing markets. Now, the rule says you should spend 70% on needs, 20% on savings, and 10% on wants.
Christine Devane, CEO and cofounder of Brightfin, has seen this sentiment in her budgeting work. She says, “With recent inflationary pressures, we’ve seen the 60/30/10 or 70/20/10 breakdown become more popular as costs of living rise, and 50/30/20 is still popular for those trying to pay off debt. The point is, the best budget is the one that works with your priorities and that you’ll use.”
What Happened When I Tried the 70-20-10 Budgeting Rule
The first thing I realized when trying the 70-20-10 budgeting rule for myself and my husband is that there’s flexibility in how you interpret the categories. What you consider a need might not be a need for your neighbor, and the same goes for wants. That means you have a little bit of room to fudge what you include in the majority 70% category.
I’ll add the caveat that I might not have the most typical budgeting breakdown, thanks to self-employment taxes, quarterly taxes, and being stuck in the middle of home renovations, but, because I love a budget (Type A over here), I was up for the challenge.
To make it a little more seamless, I took out the taxes and renovations, and just looked at everything else — the more usual monthly expenses (trust me — I’m counting down the days until floor tile isn’t a monthly expense).
And, sure enough, the 70-20-10 rule actually did come close to working out with what I spend in a month — even giving me more wiggle room than I would have imagined on wants.
Here’s how I broke out the needs, wants, and savings. Again, these categories will look different for everyone, but I defined needs as the items I truly can’t give up, although I could reduce them slightly depending on the month. Wants are the items I don’t need, although some could straddle the line (for example, fitness). And savings is a weird one for me right now with the home renovation — I continue to contribute to my solo 401(K), and my husband contributes through work, but, for the most part, anything extra is going straight towards our renovation at this point.
Needs
My needs came to approximately 64%, just under the 70% rule. This includes mortgage, utilities, business expenses, medical expenses, groceries, gas, and transportation (metro, the occasional Uber).
Wants
I included restaurants, clothing, travel, non-renovation-related home goods, subscriptions, and fitness. We cook most nights, aren’t big shoppers, and this has been a light travel month with only work trips on the calendar, so wants came out to only 8%.
However, there’s no doubt in my mind that the renovation funds hanging in the back of my head have also impacted spending in this category, even if subconsciously.
Savings
Lastly, savings. I haven’t seen a ton of clarity around what is typically included within the 10%. Does it include retirement contributions? Is it only money that goes straight into a savings or investment account? Right now, we’re hitting the 10%, however the other extra money is primarily going into “savings” accounts that are reserved for renovation expenses.
Would I Recommend the 70-20-10 Budgeting Rule?
Whether the 70-10-10 budgeting rule works for people is probably closely related to whether someone lives in an area with a high or low cost of living, as well as, of course, the ratio of their salary to expenses.
It’s not going to work for everyone and, if you live in an area where your monthly housing expenses are lower, then there’s no reason not to try using the 50-30-20 rule instead. If it lines up with your spending, do it. Finance pros are rarely going to discourage saving more.
Courtney Alev, consumer financial advocate at Credit Karma, explains, “As with any budget, how you allocate your income depends on your personal financial situation. This suggested 70-20-10 model has a high savings rate, which might not be realistic for those who are living paycheck to paycheck and struggling to save. “
She continues, “If you like the concept of this method, you can still use the same 70-20-10 structure and change the categories or percentages based on your own income, financial goals, and projected expenses. For example, if you have high-interest credit card debt that needs to be paid off, you may want to prioritize that in the short term by allocating 20% of your budget to debt paydown.”
For me, however, just looking at my spending through this lens was helpful to understand the ratio of how I spend money in a given month (even if trying to figure out a pie chart nearly did me in). When the renovations are done, I’ll definitely be revisiting this budgeting rule to readjust.
Further Reading
I Just Discovered the Smartest Way to Store Paper Towels in Your Kitchen (It’s a Game-Changer!)
