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How the viral ’70-20-10 rule’ could help you build a better budget
Many individuals establish a budget to provide their finances with a sense of order. Without a clear plan for your money, it is easy to overspend or fall behind on your long-term financial objectives.
However, budgeting does not have to involve tracking every single cent or sacrificing the things you love. The 70-20-10 budget is a straightforward money management approach that splits your after-tax income into three distinct areas: spending, savings, and debt repayment or charitable giving.
What is the 70-20-10 budget rule?
The 70-20-10 rule is a financial strategy that divides your net income into three specific buckets:
70% of your income is allocated to everyday living expenses.
20% is directed toward savings and <a Anyone who wants a clear guideline for balancing living expenses, long-term <a said Jack Howard, head of money wellness at Ally Bank.
She noted that where you live and your cost of living will impact how you apply this budgeting strategy to your own finances. For example, if housing or other essential expenses take up a larger portion of your income, you may need to adjust the percentages to fit your situation. “The most important thing isn’t hitting the exact numbers — it’s being intentional about how your money is divided in a way that reflects your values, priorities, and financial goals.”
How to implement the 70-20-10 method in your budget
Implementing the 70-20-10 rule begins with auditing your spending and organizing your costs into three groups: essential and nonessential expenses, savings and investments, and debt repayment and donations.
As you review your finances, you might discover that your current spending does not align perfectly with these percentages — and that is perfectly fine. Use this as a chance to identify costs you can trim or determine if you need to shift funds from one category to another to better suit your financial needs.
In some instances, you may not have any debt, or your debt payments might exceed the suggested 10% allocation. If that occurs, consider options such as making a lump-sum payment to lower your balance, refinancing your loans, or consolidating debt to reduce your monthly obligations.
Once you have categorized your expenses, automation can help you stay on track. Many service providers, credit card issuers, mortgage lenders, and loan companies allow you to set up automatic payments so you never miss a due date. In some cases, you may even receive a rate discount for enrolling in autopay.
70-20-10 vs. 50-30-20
An alternative to the 70-20-10 budget is the 50-30-20 rule, which suggests that you direct 50% of your after-tax income toward needs, 30% toward wants, and 20% toward savings and debt.
This approach creates a clearer distinction between essential and discretionary spending, which can help people better manage lifestyle <a When you pair a framework like this with values-based spending — getting clear on what matters most to you and what your financial goals are — it can help guide how you approach each of those buckets," Howard said.
“A strong, values-based budget should allow you to spend on the things that bring you the most joy — whether that’s travel, hobbies, or experiences with friends — while cutting back on areas that matter less to you. That balance can make a budget feel more sustainable in the long run.”
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