Master the 70‑20‑10 Rule for a Smarter Budget
Ever felt like your money disappears every month? The 70‑20‑10 rule is a quick way to see where every pound goes. It splits your after‑tax income into three buckets: 70% for everyday spending, 20% for saving or investing, and 10% for paying off debt. No complex spreadsheets, just a clear picture of your cash flow.
How the 70‑20‑10 Rule Works
First, figure out your net income – the amount you take home after taxes and any other deductions. Then multiply that number:
- 70% covers rent or mortgage, utilities, groceries, transport, and the fun stuff you need to live.
- 20% goes straight into a savings or investment account. Think emergency fund, retirement ISA, or a cash‑savings goal.
- 10% is earmarked for debt repayment – credit cards, personal loans, or any other high‑interest balances.
For example, if you bring home £2,000 a month, you’d allocate £1,400 to living costs, £400 to savings, and £200 to debt. It’s that simple.
Tips to Make the 70‑20‑10 Rule Work for You
1. Track your spending. Use a budgeting app or a notebook for a week. You’ll see whether 70% truly covers your essentials or if you need to trim a few items.
2. Start small on the 20% saving. If you can’t hit the full 20% right away, aim for 10% and grow it gradually. The key is consistency.
3. Prioritize high‑interest debt. While the rule says 10% for debt, you might want to allocate a bit more if your credit card rates are steep. Paying down interest fast frees up money later.
4. Adjust for life changes. Got a promotion? A new baby? Re‑run the percentages with your new income. The rule stays the same; the numbers shift.
5. Use automatic transfers. Set up your bank to move the 20% and 10% portions as soon as your salary lands. Automation removes the guesswork and keeps you on track.
When you stick to the 70‑20‑10 rule, you’ll notice three things: less stress about bills, a growing safety net, and lower debt balances. It’s not a one‑size‑fits‑all miracle, but it gives a solid framework to start improving your finances without feeling overwhelmed.
Give it a try for a month and see how the numbers line up with your real life. If something feels off, tweak the percentages – maybe 60‑30‑10 works better for you. The goal is to have a clear, doable plan that moves you toward financial security.
