The 70-20-10 Rule In Budgeting Your Money

How many years have you been working? Have you saved up enough of your money in the bank? Or do you like your money where you see it (in the closet where all your designer clothes are hanging)? You could be 15 or 35, it doesn’t matter because the question is: have you saved up money for your future?

Personally, I like my money where I see it – in the form of pizza on my table, everyday, for the rest of my life. Well other than that, I also like to spend it on gadgets, consoles, books, other things that I don’t really have a need for *glances guiltily over a box full of unused bags*.

While I’ve been working for more than a year now, it shames me to admit that I haven’t even saved anything for my retirement (yes, retirement because it’s never too early to think about it) yet.  PLUS the nagging thought of not having money saved up for emergency uses (like when I’ll OD on pizza and they’d have to pump my stomach), haunts me.

So how exactly can you save up money anyways? What’s the best way to do it? What’s the best formula for saving money?

Well, not really.

Well, not really.

Well, for me it all boils down to personal choice. You could have your own formula depending on your needs and preferences or, like me, follow the 70-20-10 rule. And it goes like:

  • 70% for living expenses (rent, food, clothing, gas)
  • 20% for savings, which is then divided to ideally into 3 parts:
    • 10% for retirement or insurance (pension plans, health insurance plans)
    • 5% for emergencies (hospital bills for when your health insurance doesn’t cover it, house repairs, electronic repairs, emergency concert tickets but I kid)
    • 5% for specific goals (vacation, new gadgets, investments, seriously concert tickets)
  • 10% for debt (car loans, credit card bills, house loans)

EDIT: I’m no expert in finances, I just practically researched some ways to help save money and I stumbled upon the 70-20-10 rule. As you can see down the comments section below, there’s a suggestion by a friend of mine to prioritize certain personal financial goals throughout different periods in your life, which is an absolutely helpful idea! Especially for those whose incomes are not substantially large (e.g. me) I could choose to save up the 20% of my salary for my savings on really specific priority financial goals of mine within a certain period of time. Let’s say, I’ll put 20% of my salary to emergency funds for a whole year, and the next year I’ll allocate that 20% of my savings to investments, and so on and so forth. This would be a great way to save up quickly for a specific goal, like when you are saving up for a car.

But for those who have existing insurance plans/pensions plans/investments (like in the Philippines, there’s PhilHealth and SSS to pay for every month) then you might have to really adjust the percentages of this rule. An alternative would be to pay off everything that you need to pay for that month, then the remaining that you have of your salary is what you’ll have to divide into the 70-20-10 rule.

I’m rambling but what I’m basically saying is that you can mix up the 70-20-10 rule and even turn it into 60-20-10-10 with 10% of it as the money you use to give back to the community, important thing is you always, and I cannot stress it enough, ALWAYS allocate a percentage of your money to savings.

So that’s it! Easy peasy! You can either just leave all your savings in one bank account or make a separate bank account where you put all 20% savings in. But if you’re a caveman who doesn’t believe in banks (i.e. me) you would probably withdraw all your cash and put it separately in labelled jars.

Anyways, whatever works for you will be fine as long as you get to set aside some money for your savings and for emergency purposes. You could never be prepared enough, and when you do, you will thank the gods that you did.

Don’t forget to write down what you think on the comments section below, like, follow, share, tweet, subscribe, and everything.

Your friend,Signature


5 thoughts on “The 70-20-10 Rule In Budgeting Your Money

  1. Jonatahn Andro Tan says:

    It may be rather challenging to have it all divided into very small parts on the 20% savings (10 – 5- 5), especially when income is not substantially big to produce a significant 5%.
    I suggest to prioritize certain financial goals may it be an emergency fund, investment, and/or retirement plan. You will tend to prioritize one over the other in different life stages.


  2. Shayne says:

    I may be a little bit of a control freak because I opt for having multiple bank accounts. Each is for specific expenses: living, travel, emergencies, and the last one is to fund my “future” or I guess my years towards becoming retired and senile.


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