70-20-10 Budgeting Rule for Financial Planning

Why Use the 70-20-10 Budget Rule?

Most of us struggle to save money. This is not because we spend too much, but because we don’t really keep track of where we’re spending. This is where the 70-20-10 rule comes into play. It helps you segment your finances according to priority and ensures you save consistently.

How the 70-20-10 Budget Rule Works

1. Use 70% of Your Income for Spending – Want & Need

This segment of your budget is allocated for essential costs such as rent, electricity bills, commuting and groceries. It includes both constant monthly outlays (such as housing rent and vehicle loans) and fluctuating expenditures (like food shopping and leisure activities). 

2. 20% – Savings & Investments

Allotting 20% of your income to savings and investments each month is crucial for building financial security. This allows you to save for future goals, emergencies, and retirement. 

When choosing saving methods, consider your risk tolerance and goals. Options include savings accounts, stocks, bonds, and retirement accounts.

  • High-Yield Savings: Great for short-term goals
  • Emergency Fund: Crucial for surprise expenses, aiming for 3-6 months’ living costs
  • Certificates of Deposit: Lock in money at a fixed rate for a set timeframe. Useful for medium-term targets
  • Money Market Accounts: Offer higher interest than savings for medium-length objectives
  • Stocks and Mutual Funds: For long-haul growth potential and higher returns over time

3. 10% for Debt Repayment or Donations

Letting debt accumulate is one of the most elemental financial mistakes you can make. Instead, it is much more prudent to reserve a small fraction of your monthly budget for debt repayment.

  • Debt Snowball: Focus on paying the smallest debts first
  • Debt Avalanche: Prioritise highest-interest debts first

Pros & Cons Of 70-20-10 Budget Rule


  1. Includes Charitable Giving: The budgeting rule allows for 10% of income to be directed towards debt repayment or charitable donations, promoting social responsibility and personal values in financial planning​​.
  1. Flexibility in Spending: It offers flexibility within the 70% allocated for living expenses, allowing individuals to prioritise their spending based on personal needs and wants without stringent restrictions​​.
  1. Helps in Debt Management: The rule is effective for managing and paying off debts, as it includes a dedicated portion of income for debt repayment over and above the minimum required payments​.


  1. Challenging for High Debt or Living Expenses: For individuals with high living expenses or substantial debt, limiting these to 70% of their income might be impractical or difficult.
  1. Not Ideal for High-Income Individuals: Those who can comfortably spend less than 70% of their income might find this rule less beneficial, as it doesn’t allow for maximizing savings or debt repayments beyond the set percentages.
  1. Lacks Detailed Spending Guidance: While the flexibility in the 70% allocated for expenses can be a pro, it can also be a con for those who need more structured financial guidance and struggle with impulse spending or budgeting discipline.

Steps to Implement the 70-20-10 Budgeting Rule

  • After-Tax Income Calculations: Base your budget on your net income
  • Focus on Your Living Expenses: Limit your essential spending to 70% of your income
  • Keep Money Aside for Saving and Future Expenses: Allocate 20% of your income to savings and investments
  • Reserve 10% of Your Income: In debt repayment or donations
  • Track Your Spending: To ensure adherence to the budget
  • Adjust the Percentages When Needed: Depending on changes in your financial situation

Final Thoughts

Setting a budget enables you to achieve what thrills you. It makes the activities and items you are passionate about within reach. Using a budget wisely paves the path to financial independence. 

If you are new to investing or want to improve your investment plans, Appreciate Wealth can assist. Check out our website for more information. We can help set you on the road to financial prosperity.


  1. Is the 70-20-10 rule good?

Yes, the 70 20 10 rule budget is beneficial for those looking for a balanced approach to managing their finances. It helps in saving for the future while also allocating funds for essential expenses and discretionary spending. 

  1. What are the categories of the 70 budget?

The 70% portion of the 70 20 10 budget goes toward vital and fixed costs. This consists of housing, utilities, food, transport, basic clothing, and healthcare. It handles all the necessary charges for daily life.

  1. Is 70-20-10 still relevant?

Yes, the 70 20 10 budgeting rule is still practical, especially for those starting budgeting or people with high living costs. It delivers a simplified way of dividing income to address essential fees, savings, and personal spending.

  1. What is the 70 20 10 development goal?

The 70 20 10 development goal is to create a balanced financial strategy that covers immediate needs, future security, and personal enjoyment.

  1. How relevant is the 70:20:10 model in the Internet age?

In the Internet age, the 70:20:10 model remains relevant, especially as it can be adapted using online tools and banking features for more effective implementation.

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