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Budgeting is an important (if not exactly thrilling) part of running a household. Unfortunately, it’s never been my strongest suit, so I’ve tried many different budgeting methods over the years with varying levels of success.
After seeing the 70-20-10 budgeting rule going viral on TikTok recently, I wanted to share it with you here to aid your financial goals for the new year — or at least help you get back on track after all that holiday spending!
What Is The 70-20-10 Budgeting Rule?
Apparently, the old 50-30-20 split for budgeting (putting 50 percent of your income toward needs, 30 percent toward wants, and 20 percent toward savings) just isn’t as useful as it once was! The modern economy has made it difficult to maintain those percentages, so those numbers needed an update.
Enter the new 70-20-10 budgeting rule. With this split, you put 70 percent of your income toward things you need, 20 percent toward your savings, and 10 percent toward things you want.
This budgeting rule is easy to remember and suits a variety of financial scenarios. The 70 percent split typically includes rent or mortgage payments, utilities, medical expenses, groceries, and transportation, but it can also include debt repayment for those paying off credit cards or student loans.
Saving 20 percent of your income may sound like a tall order, but it’s a great way to build a “rainy day fund” that you can dip into as needed. Don’t forget that there are plenty of ways to spend less on the things you need without sacrificing your standards, like making DIY cleaning and laundry solutions and cooking homemade meals at home!
The final 10 percent of your income is reserved for things you want but don’t need, like travel, streaming services, and luxury items. If you’re looking for a better way to budget your finances this year, try this modern take on a classic budgeting rule!
What budgeting method, system, or rule do you use?
