If you need a very simple and easy to follow budgeting system, try the 30-30-30-10 budget. Here’s how it works and why it’s great!
Everyone should have some kind of budget.
Without a budget and a solid plan for where and how your spend your money, you run the risk of depleting your savings and having no money left to pay for your basic needs (i.e. housing, food).
A budget gives you guidelines to keep you on track.
There are so many different types of budgeting methods out there!
If you have never had a budget and want to start, you might feel overwhelmed.
A very simple and easy way to start budgeting is the 30-30-30-10 budget.
This percentage-based budgeting method can be very helpful for you if you want to build up your savings (or pay off debt) but find many budgeting strategies complicated and difficult to follow.
Using the 30-30-30-10 budget, you allocate money via percentages into 4 categories.
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What is the 30-30-30-10 Budget?
The 30-30-30-10 budget is a simple, percentage-based budget, that is an easy way to keep track of expenses and manage your money.
Every month, you divide your income by percentages into 4 categories as follows:
30% – Housing
First, 30% of your income will be for housing (rent or mortgage).
30% – Needs
Next, 30% of your income will be for basic needs.
Basic needs include things like:
- Food
- Transportation to work
- Utilities
- Health care costs (insurance, etc.)
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30% – Financial goals
Next, 30% of your income will be put toward your financial goals.
Some examples of financial goals include:
- Paying off debt
- Opening and funding a savings account
- Setting up an emergency fund
- Retirement accounts (401K, IRA, etc.)
- College fund for kids (or help them go to college debt-free!)
- Vacation fund
- Buying a home (or paying off your mortgage)
- Investing – Build up your investments quickly (I used the method from this book and aggressively saved $1000-2000 a month for over a year in order to quickly build up my investments.)
- Starting a business
- Donations to charity
10% – Wants/Entertainment
Finally, 10% of your income will be for entertainment and anything non-essential.
Ideas include:
- Eating out
- Movies at the theater
- Weekend trips
For example, if you have an income of $5000 per month, you would divide this as follows:
- $1500 – Rent or mortgage
- $1500 – Basic needs
- $1500 – Financial goals
- $500 – Entertainment, etc.
The simplicity of this plan means that anyone can use it – whether you have a large family or it’s just you!
When you are saving up extra money, don’t forget to start and fill up an emergency fund.
Most money experts say to have enough in your emergency fund to cover 3 months of living expenses.
This is very important in case something unexpected happens – like a hospital visits, job loss, death in the family, non-routine car maintenance, etc.
Who Should Use the 30-30-30-10 Budget?
Are you wondering if you should try the 30-30-30-10 budget? Let’s take a look at the pros and cons.
The Benefits of a 30-30-30-10 Budget
This budget has a lot of benefits:
- It’s very simple – super easy to set up and follow.
- You don’t need to spend a lot of time on it.
- The focus is on saving money. This is great if you want to pay off debt or save a lot toward your financial goals.
- There is a category for fun! Any budgeting method would terribly difficult and hard to keep up with if you didn’t have any money set aside for entertainment.
- This method can be very beneficial for people who need help getting control of their spending and getting a handle on their finances.
- Great introduction to budgeting for newbies.
- A way to save aggressively (or focus on paying off debt) and reach your financial goals more quickly.
- Can help you learn to live more frugally (and make it a life-long habit)
If you really want to save a lot more money per month, check out the 60-30-10 budget method!
The Cons of a 30-30-30-10 Budget
While the 30-30-30-10 budget has quite a few pros, it might not be a good fit for you if you:
- Live in an area with a high cost of living, where the rent (or mortgage) is higher than normal. Housing is usually the most expensive part of a budget, so if you can keep this part low, you can really save a lot of money.
- Want to have more money in the entertainment category. This is fine if you can afford it and don’t have lots of debt or other expenses.
- Have a varied income. Budgeting can be a bit more challenging if your income varies a lot from month to month.
- Are a low-income household (especially if you live in a high cost of living area with high rent).
Related: Cheap Ways to Live – and Save Lots of Money!
How to Use a 30-30-30-10 Budget
Get started on your 30-30-30-10 budget today with these simple steps!
Financial Goals
First, what are your financial goals?
How much money will it take to get there?
How fast would you like to do this?
Write down your goals and choose one.
You can use a savings chart like this one to keep track of how much you are saving over the course of a year.
Related:
How to Make an Extra $1000 per Month
Hacks to Make Money
Income
Next, calculate your monthly take-home income.
If you are paid on a W2 and work steady hours, this will be easy. If you are self-employed, a contractor or freelancer, or have varying hours, you can use your annual income and divide by 12 or your lowest monthly income as a general guide. (When you are paid extra one month, great! Put that towards savings or debt payoff.)
Related: Frugal Living Tips to Save Money
Expenses
Then, list your fixed expenses (rent, car payment, insurance, etc.) and estimate your variable expenses (gas, groceries, etc.).
Don’t forget to include periodic expenses like car maintenance, pet visits, and other costs that might pop up throughout the year.
You can use a worksheet like this one to write everything down.
Divide your expenses into the correct categories and use this formula to determine the percentage of monthly take-home income that should be going into each category:
- Take-home pay x 0.30 = Housing
- Take-home pay x 0.30 = Needs
- Take-home pay x 0.30 = Financial goals
- Take-home pay x 0.10 = Entertainment
When you have your totals, you can compare to the amounts you calculated and determine if you need to make any adjustments to your budget to cut costs in any category.
Time Commitment
Are you willing to put in the work required to keep track of a budget?
This system is fairly easy, but does require a little bit of time. You can use this method to save aggressively for a few months or years (or a longer time).
If you are very determined, try the $10,000 savings challenge and use this printable to keep track.
Debt
Do you have any debt to pay off? Student loans or credit card debt?
You can use this method to have more money to get rid of your debt faster.
Related:
Pay off debt fast!
Habits of debt-free people
Don’t worry too much if you can’t fit your spending into the exact percentages right now. You can just start and work toward the 30-30-30-10 budget goal.
Focus on increasing your income or decreasing your spending to help you get there!
Related: No-Spend Weekends: Have Fun Without Spending Money!
Try Another Percentage-Based Budget
Another popular percentage-based budget is the 50-30-20 budget designed by Elizabeth Warren. You can read more about it in her book: All Your Worth: The Ultimate Lifetime Money Plan.
Another percentage-based budget is the 60-30-10 budget which focuses more heavily on saving. You can read more about it here.
Final Thoughts on the 30-30-30-10 Budget
The type of budget that you choose isn’t as important as your commitment to persevere in budgeting and keep track of your finances. Try the 30-30-30-10 budget and adjust as needed.
What do you think? Have you tried the 30-30-30-10 budget? What is your favorite budgeting method?
