Do you want to set a budget but don’t know where to start? Then try the 10 10 80 rule budget!
Do you want to get your finances in order and plan a successful future for yourself and your family?
One important part of this is budgeting.
While certain budgets are better suited to fast-track your way to your financials goals, the crucial part of budgeting is actually sticking with it!
(It’s too easy to give up!)
Choosing a budget and sticking with it can help you learn how to spend less and put more toward savings.
If you are new to budgeting or struggling to curb your spending, the 10 10 80 rule budget might be a good place for you to start.
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What is the 10 10 80 Rule Budget?
The 10-10-80 rule budget is a percentage-based budget that focuses on keeping your monthly spending within 80% of your income.
In general, most households will need to spend no more than 80% of their income to live well.
If you are currently living paycheck to paycheck, you will need to make adjustments in order to cut your spending down to 80% of your take-home income.
If you are used to spending everything each month and getting anything you want, this will probably be a difficult adjustment.
You may feel like you are missing out, but you might be surprised to see that you can still live a good life (even with an older cell phone or car or without the latest electronic gadget!).
Start by learning to live below your means.
So, what exactly does the 10-10-80 rule budget look like?
Every month, you divide your income by percentages into 3 categories as follows:
10% – Give
First, 10% of your take-home income will go to charity.
If you have a lot of debt, you can use this 10% to pay it off first and then when you are caught up switch to giving. However, the 60-30-10 budget can help you pay off debt faster!
Giving back to your church or community is important because this:
- Encourages you to help others and look past yourself.
- Helps you to be thankful for what you do have (which is more than many people throughout the world).
- Builds up the community by supporting areas of real need.
- Teaches you to develop a healthier relationship with money (so as to not be stingy or greedy).
10% – Saving, Investing, or Retirement Accounts
Next, 10% of your take-home income will be for saving.
If you don’t have a savings account, you can start by setting one up now.
You can also open a retirement or investment account and start allocating money to each of these as well. Be sure to match all 401K contributions from your employer!
Set up automatic withdrawals from your checking account into your savings account so that you will not forget.
If you have already started on saving money or already have a well-set savings account, you can work toward other financial goals.
Begin by making a list of financial goals – short and long term. When you reach the first one, keep going toward the second one!
Examples of short-term financial goals:
- Set up an emergency fund
- Save up 1-month of living expenses
- Save up 3-6 months of living expenses
- Pay off debt
Examples of long-term financial goals:
- Downpayment for a house
- Retirement funds
- Starting a business
- College fund for your kids (or help them go to college debt-free instead!)
- Take a special vacation
80% – For All Living Expenses
Finally, the rest of your take-home income will be for all of your living expenses.
You should never spend 100% of your monthly take-home income on living expenses, otherwise you will have nothing for emergency situations or your future needs. This is considered living “paycheck to paycheck” and is not good for the financial health of your family. This is where budgeting comes in handy!
If you are currently living paycheck to paycheck, then your first goal should be to make all of your living expenses to be less than 80% of your take-home income each month.
If you can’t, then you need to reevaluate your spending and review your needs and wants.
We all have items in our monthly budget that we think we can’t live without, but that are certainly non-essential wants.
Things like the newest cell phone or a high cell phone plan instead of a much cheaper option. Or subscriptions to magazines or gym memberships that we can do without.
Find ways to save money on your monthly expenses:
- Cheap Food to Buy When Broke
- Dirt Cheap Meals to Make on a Budget
- Cheap Ways to Live
- Frugal Living Tips to Save Lots of Money
You can also look for ways to increase your income:
- Household Items to Sell for Quick Cash
- Work at Home Jobs for Homemakers
- Creative Hacks to Make Money
Example of the 10-10-80 Rule Budget in Action
Let’s look at a simple, practical example of the 10-10-80 rule budget:
To follow these percentages, you need to know your take-home pay:
- Take-home pay x 0.80 = all expenses for the month
- Take-home pay x 0.10 = savings (or paying off debt)
- Take-home pay x 0.10 = tithing/charity
For example, if you take home $4000 a month, you would allocate your funds like this:
- $4,000 x 0.80 = $3,200 – all expenses
- $4,000 x 0.10 = $400 – savings
- $4000 x 0.10 = $400 – tithing/charity
This method is very simple because you only have 3 categories to work with and 80% of your monthly income will be going toward normal bills and expenses.
Do you really want to jump start your savings? Try the 60-30-10 budget instead.
Who Should Use the 10 10 80 Rule Budget?
Are you wondering if the 10 10 80 rule budget will work for you? Here are the pros and cons:
The Benefits of the 10 10 80 Rule Budget
- Baby steps to budgeting – it is a good place to get started if you have never budgeted before.
- A great way to start saving money.
- Learn to keep your spending within 80% of your monthly take-home pay and not live paycheck to paycheck.
- Helps you to financially prepare for your future – have extra money to save or invest towards your future or to be prepared for emergencies.
The Cons of the 10 10 80 Rule Budget
- Small step – Saving only 10% of your money is a very tiny step. It will take you a lot longer to reach your financial goals.
- Big adjustment – If you are used to spending everything each month, this lifestyle shift could be a hard adjustment.
- Unless you are starting this budget at a very young age, you should really try to save or invest more than 10% of your income.
- If you have a lot of debt, will take you much longer to pay it off by only saving 10%.
Modifications to the 10 10 80 Rule
If you have outstanding debt, you can use the savings portion of the 10% to pay off your debt first. Then, when you finish you can put that amount into a savings account or emergency fund instead.
Try Another Percentage-Based Budget
Since percentage-based budgets are the easiest to follow, you could also try one of these percentage-based budgets instead:
60-30-10 rule budget – This is a great way to save money fast!
30-30-30-10 budget – Another simple budget, but with a higher savings portion.
Final Thoughts on the 10 10 80 Rule Budget
Get an easy start to budgeting by using this 10 10 80 budget. This system is especially helpful if you have never budgeted before.
Don’t feel like you have to keep using with this budget forever.
Start by saving 10% until you have a solid emergency fund and have paid off all debt.
Then review your income and budget.
Can you challenge yourself to live off 50% of your income? What about 30%?
Should you only save 10%? Nope! If you are able, definitely save more money each month.
Should you only give 10%? If you increase your income and start making a lot of money, you can absolutely donate more than 10%.
Whatever you do, start budgeting today and stick with it!
Have you tried the 10-10-80 budget? What do you like about it? What is your favorite budgeting method?