Want to manage your finances effectively? Try the 70-20-10 rule. Allocate 70% of your after-tax income towards basic monthly expenses like housing, utilities, food, transportation, and personal living expenses. The remaining 30% should be split between savings and discretionary spending, with 20% going towards savings and 10% towards non-essential expenses. This budgeting strategy helps prioritize spending, save money, and control spending.
What is the 70% Rule Budget?
Managing finances is one of the most important aspects of our lives. It is a skill that we all need to master in order to live a comfortable life. However, not everyone is good at budgeting. Some people find it difficult to manage their finances and end up spending more than they earn. This is where the 70% rule budget comes in.
The 70% rule budget is a simple budgeting strategy that helps you manage your finances effectively. The rule holds that 70 percent of your after-tax income should go toward basic monthly expenses like housing, utilities, food, transportation, and personal living expenses. The remaining 30 percent should be split between savings and discretionary spending.
How to Use the 70-20-10 Rule in Budgeting
Now that you know what the 70% rule budget is, let’s talk about how to use it. The first step is to calculate your after-tax income. This is the amount of money you have left after taxes and other deductions have been taken out of your paycheck. Once you have this figure, you can start allocating your income according to the 70-20-10 rule.
The 70% Rule Budget in Action
Let’s say your after-tax income is $5,000 per month. According to the 70-20-10 rule, you should allocate $3,500 (70 percent) toward basic monthly expenses. This includes things like rent/mortgage payments, utilities, groceries, transportation, and other necessary expenses. The remaining $1,500 should be split between savings and discretionary spending.
Of the remaining $1,500, $300 (20 percent) should be allocated toward savings. This includes things like retirement savings, emergency funds, and other long-term savings goals. The remaining $1,200 (10 percent) can be allocated toward discretionary spending. This includes things like entertainment, dining out, hobbies, and other non-essential expenses.
The Benefits of Using the 70% Rule Budget
There are several benefits to using the 70% rule budget. First and foremost, it helps you prioritize your spending. By allocating the majority of your income toward basic monthly expenses, you ensure that you have a roof over your head, food on the table, and other necessities taken care of.
Secondly, the 70% rule budget helps you save money. By allocating 20 percent of your income toward savings, you ensure that you are putting money aside for the future. This can help you achieve your long-term financial goals, such as buying a house or retiring comfortably.
Finally, the 70% rule budget helps you control your spending. By allocating only 10 percent of your income toward discretionary spending, you ensure that you are not overspending on non-essential items. This can help you avoid debt and live within your means.
In conclusion, the 70% rule budget is a simple yet effective budgeting strategy that can help you manage your finances effectively. By allocating 70 percent of your income toward basic monthly expenses, 20 percent toward savings, and 10 percent toward discretionary spending, you can prioritize your spending, save money, and control your spending. Give it a try and see how it works for you!
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