Want to manage your finances effectively? Try the 70 20 10 rule! This simple and practical rule suggests dividing your income into three categories: 70% for essentials, 20% for debt/savings, and 10% for fun. Essentials include living expenses, debt/savings include repayment of debt or savings, and the fun bucket includes non-essential expenses. Prioritize debt, budget wisely, and set aside some money for fun. By following this rule, you can achieve financial freedom.
The 70 20 10 Rule: A Simple Guide to Managing Your Finances
Managing your finances can be a daunting task, especially if you’re not sure where to start. The 70 20 10 rule is a simple and effective way to manage your money and achieve your financial goals. This rule suggests that you divide your income into three categories: essentials, debt/savings, and fun. Let’s take a closer look at each category.
The Essentials: 70%
The biggest chunk of your income, 70%, should go towards your living expenses. This includes your rent/mortgage, utilities, groceries, transportation, and any other necessary expenses. It’s important to budget wisely and make sure that you’re not overspending in this category. Cutting back on unnecessary expenses can help you save money and stay within your budget.
The next 20% of your income should go towards repaying any debt or to savings if all your debt is covered. This category includes credit card debt, student loans, car loans, and any other outstanding debts. It’s important to prioritize your debt and pay off the highest interest rate debts first. Once your debt is paid off, you can focus on building up your savings. This category also includes emergency funds, retirement savings, and any other long-term savings goals.
Fun Bucket: 10%
The remaining 10% of your income is your « fun bucket ». This money is set aside for the things you want after your essentials, debt, and savings goals are taken care of. This category includes entertainment, hobbies, travel, and any other non-essential expenses. It’s important to have some money set aside for fun, but it’s also important to not overspend in this category.
In conclusion, the 70 20 10 rule is a simple and effective way to manage your finances. By dividing your income into three categories, you can prioritize your spending and achieve your financial goals. Remember to budget wisely, prioritize your debt, and set aside some money for fun. With a little discipline and planning, you can take control of your finances and achieve financial freedom.
References for What is the 70 20 10 rule money?
- Forbes – Understanding the 70 20 10 Rule for Financial Planning
- Money Under 30 – The 70 20 10 Rule for Money Management
- Investopedia – 70-20-10 Rule
- The Balance – The 70 20 10 Rule for Spending and Saving
- Mint – The 70 20 10 Rule for Financial Prioritization
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