The 60/30/10 rule budget is a simple yet effective budgeting strategy that helps individuals manage their finances more effectively.
Create simple categories for your essential expenses, long-term goals and let your wealth grow with this budget rule.
Ready to learn how it is done?
Let’s get started!
60/30/10 Rule Budget
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Please know that I’m not your financial advisor. So use this article for educational purposes.
Always check with a good financial advisor to get tax advice for your particular circumstances
Toward the end, I have also suggested a sample 60/30/10 rule budget for different people and income groups.
What is the 60-3-10 Rule for Budgeting?
This rule suggests dividing your monthly income into three categories:
- 60% for essential expenses,
- 30% for discretionary spending, and
- 10% for savings and debt repayment.
The beauty of this rule lies in its simplicity and flexibility.
It provides a clear framework for allocating your income while still allowing room for personalization based on your unique financial situation.
By following this rule, you can ensure that your essential needs are met, while also enjoying some discretionary spending and contributing to your long-term savings goals.
The 60/30/10 rule budget helps individuals strike a balance between meeting their immediate needs, indulging in some wants, and preparing for the future.
This budgeting strategy is particularly helpful for those who struggle with overspending or have difficulty prioritizing their financial goals.
The 60/30/10 rule budget has gained popularity in recent years. Especially, if you have already paid large chunks of debt, this rule is great.
Breaking Down The 60/30/10 rule budget:
- 60% for Needs:
Essential expenses are the necessities that you cannot live without. These expenses are typically fixed or recurring, and they take priority over other expenses.
Examples of typical essential expenses include:
- Rent or mortgage payments
- Utility bills (electricity, gas, water, internet, etc.)
- Groceries and household supplies
- Transportation costs (gas, car insurance, public transportation passes)
- Health insurance premiums
- Minimum loan or credit card payments
By allocating 60% of your income to essential expenses, you ensure that your basic needs are met and that you prioritize these crucial expenses.
This category should be the first one you budget for, as it represents the foundation of your financial stability.
- 30% for Want (Discretionary Spending):
Discretionary spending refers to the expenses that are not essential but contribute to your overall quality of life.
Examples of discretionary spending include:
- Dining out or ordering food delivery
- Entertainment (movies, concerts, subscriptions, etc.)
- Hobbies and recreational activities
- Clothing and personal care items
- Gym memberships or fitness expenses
- Travel and vacations
While discretionary spending is not essential, it is essential for maintaining a balanced and enjoyable lifestyle.
By allocating 30% of your income to this category, you can enjoy some of the things that bring you happiness and fulfillment without compromising your financial stability.
- 10% for Savings and Debt Repayment:
The final 10% of your income should be allocated towards savings and debt repayment.
This category is crucial for building long-term financial security and achieving your financial goals.
Examples of savings and debt repayment include:
- Emergency fund contributions
- Retirement savings (401(k), IRA, etc.)
- College savings plans
- Additional debt payments (student loans, credit cards, etc.)
- Saving for specific goals (down payment, vacation, etc.)
By consistently contributing 10% of your income to this category, you can accelerate debt repayment, build an emergency fund, and take advantage of compound interest to grow your retirement savings.
This category is often overlooked, but it is essential for achieving long-term financial freedom and security.
Implementing the 60/30/10 Rule Budget
To implement the 60/30/10 rule budget effectively, follow these steps:
Step 1: Calculate your monthly take-home pay
The first step is to determine your monthly take-home pay. If you do one full-time with a fixed salary and hours, this will be easy. It will be in your payslips from the employer.
If you do a job with irregular hours and also have other sources of income such as side hustles or investments, add them all together for the last 3-4 months. It will give you a fair idea of your monthly take-home pay.
Example: Let’s assume your monthly take-home pay from a day job, and part-time work is $4,000.
Step 2: Categorize your expenses
You’ll need to track and categorize your expenses accurately.
To do this, review your bank statements, credit card bills, receipts, and utility bills from the previous 2-3 months.
You can use budgeting apps or spreadsheets to make this task faster.
Categorize your expenses as essential ( needs), discretionary (wants), or savings/debt repayment.
Make sure you are very clear on your definition of Needs vs Wants. If you are still not clear, read this needs vs wants in a budget article.
You may have some months when you spend more on the needs vs wants.
And there will be some months in the past where you went a little overboard and shopped the biggest sale to stockpile things you need for the rest of the year like November / December.
Take an average of the last 3 months’ spending on each category- essential ( needs), discretionary (wants), or savings/debt repayment.
Be honest and accurate in your categorization to ensure that your budget reflects your actual spending habits.
Step 3: Allocate your income according to the 60/30/10 budget rule
Once you have your income and expenses categorized, it’s time to allocate your income based on the 60/30/10 rule.
Using the example from Step 1, with a monthly take-home pay of $4,000:
- 60% for essential expenses: $4,000 x 0.6 = $2,400
- 30% for discretionary spending: $4,000 x 0.3 = $1,200
- 10% for savings and debt repayment: $4,000 x 0.1 = $400
Adjust your expenses within each category to fit the allocated amounts.
For example, if your essential expenses ( needs) exceed $2,400, you may need to cut back on discretionary spending (wants) or find ways to reduce your essential costs.
This article will help you slash your monthly essential grocery cost by half.
What is the difference between 50-30-20 and 60-30-10 Budget Rule?
You must have read about the 50-30-20 budget rule. It is different from the 60/30/10 budget rule.
| No. | 60/30/10 Budget Rule | 50-30-20 Budget Rule |
| 1 | More suitable for individuals or households with higher incomes and higher fixed expenses. | Suitable for individuals or households with a moderate income and relatively low fixed expenses. |
| 2 | Useful for those who have a harder time separating needs from wants or have a more expensive lifestyle. | Helpful for those who need a stricter separation of needs and wants to better control discretionary spending. |
| 3 | Appropriate for those who have already paid off significant debt and are focused on saving or investing. | Ideal for those who are working towards specific financial goals, like paying off debt or building an emergency fund. |
| Download the Free 60/30/10 Budget Worksheet here | Download the Free 50-30-20 Budget Worksheet here |
Each budget rule has significant advantages. You can use both in different phases of your life. If you are completely new with budgeting I suggest start with 50-30-20 rule first. When you have paid of significant portion of your debt, then switch to 60/30/10 budget rule.
Benefits of 60/30/10 Budget Rule:
Like any budgeting strategy, the 60/30/10 rule has its benefits and challenges. Understanding these can help you make an informed decision about whether this rule is right for you.
- Simple and easy to understand-
The 60/30/10 rule for budgeting is straightforward to understand. So no matter what education you have, it is accessible to you now.
We humans love following rules, in general.
Just 3 rules are easier to implement and follow consistently.
- Promotes financial discipline and accountability
When you allocate the expenses to 3 fixed categories, it reduces the overwhelm and confusion.
Confused people can’t manage money well.
But a structure like this budgeting rule encourages you to follow financial discipline.
When you work with your family in following the the 60/30/10 rule budget, it gives accountability to every member of your family.
No more fights or disagreements on where to go next for summer vacation.
Isn’t that cool?
- Promotes a well-rounded financial life:
There are times when you want to enjoy the simple pleasures of life like celebrating a special someone or a new wardrobe for the summer.
Imagine not having to worry about those sudden unexpected expenses popping up in the middle of a month.
You can strike a balanced approach without sacrificing too much in any one area using the 60/30/10 budget rule.
- Flexibility to adjust percentages during major life changes:
If your essential expenses are higher or lower than 60%, you can adjust the other 2 categories’ percentages accordingly.
Just avoid being too flexible though. You don’t want to make it hard to follow the simple rule.
Now comes the time to share a few challenges.
Challenges of 60/30/10 Budget Rule:
- May not work for everyone’s unique financial situation
The 60/30/10 rule is a general guideline, and it may not be a perfect fit for everyone’s specific financial situation.
For example, individuals with significant debt or high housing costs may need to adjust the percentages to accommodate their circumstances.
You may have tweaked the budgeting rule way too often. In this case, stick with the basic 60-40 rule budget.
- Requires consistent tracking and monitoring of expenses
To implement the 60/30/10 rule effectively, you need to consistently track and categorize your expenses.
That means you need to set aside dedicated time for this budgeting method.
This can be time-consuming and may require diligent record-keeping, especially for those with variable or irregular expenses.
- Dealing with irregular or variable income
The 60/30/10 rule of budgeting assumes a fairly consistent monthly income.
If you are working as a freelancer or commission-based employee, your income may be irregular or variable income streams.
In this case, you may need to adjust this budgeting rule fairly often to account for fluctuations in income.
- Adjusting for large, irregular expenses
While the rule accounts for regular essential (needs)and discretionary expenses (wants), it may not adequately address large, irregular expenses.
Large but less frequent expenses like home repairs, medical bills, or car repairs are harder to predict in advance.
These expenses may require additional budgeting considerations such as setting aside sinking funds for expected life events.I suggest you can consider to use savings category for these sinking funds if your income has room in it.
You may not have enough room for sinking funds every month. But whenever you can save money, even if it is once a quarter or a year, set some money aside for these irregular expenses. E.g. save your annual tax refund for home repairs.
How to customize the 60/30/10 Rule Budget
You can easily customize the 60/30/10 rule to suit your individual needs.
Follow the tips below for tailoring the rule to your specific circumstances:
Method 1: Adjust the percentages in different stages of your life.
While it is a great way to start budgeting with the 60/30/10 rule, you can always tweak the percentages once you get a good handle on your finances.
For example, if you have a high housing cost or significant debt, you may need to increase the percentage allocated to essential expenses and reduce the discretionary spending percentage.
Conversely, if you have a lower cost of living or minimal debt, you could allocate a higher percentage to savings.
You may be tempted to allocate more percentage to discretionary spending, but avoid that trap as it can quickly become a habit to spend on things you do not need.
Method 2: Prioritize specific financial goals
The 60/30/10 budget rule provides a general framework, but you can modify it to prioritize specific financial goals.
For instance, if your primary goal is to pay off debt this year or in the next few years, allocate a higher percentage to debt repayment.
In this case, reduce the discretionary spending percentage temporarily by finding creative ways to save money.
Similarly, if you’re saving for a significant purchase, such as an upcoming tuition fee for kids, you could temporarily increase the savings percentage.
Also, consider reducing discretionary spending until you reach your savings goal fo kids’ tuition fee.
Method 3. Incorporate irregular or variable income
If you have an irregular or variable income, you may need to adjust the 60/30/10 rule to account for fluctuations.
One approach is to calculate your average monthly income over a longer period (e.g., six months or a year) and use that as the basis for your budget.
Alternatively, you could budget based on your lowest expected income and adjust as needed when you receive higher income.
When hubby and I were planning to switch to a one-income family, we stuck with the budget made for just one income for about 6 months in advance. That helped us prepare mentally and financially.
And now when we both are working, whatever is earned extra goes towards the sinking fund for our dream farmland.
Method 4. Consider using percentages as general guidelines
While the 60/30/10 rule provides specific percentages, you can treat them as general guidelines rather than strict rules.
For example, if your essential expenses are 55% of your income and your discretionary spending is 35%, that’s still relatively close to the suggested allocations.
The key to a balanced conscious debt-free life is to prioritize essential expenses, allocate some funds for discretionary spending, and contribute to savings and debt repayment.
Method 5. Reevaluate and adjust regularly
Your financial situation and goals may change over time, so it’s essential to reevaluate and adjust your budget regularly.
Review your expenses and income whenever there’s a significant change in your circumstances.
This will help you stay on track and ensure that your budget remains aligned with your current priorities.
Real Life 60/30/10 Budget Rule Examples:
To further illustrate how the 60/30/10 rule can be applied, let’s consider a few examples:
Example 1: Single individual with a moderate income
Sarah is a young professional with a monthly take-home pay of $4000. She asked how she could follow this rule
How to budget $4,000 a month?
Here’s how Sarah could apply the 60/30/10 rule:
| 1. | Needs ( Essential Expenses) | Amount | |
| Rent | $1500 | ||
| Utilities | $200 | ||
| Groceries | $300 | ||
| Transportation | $200 | ||
| Insurance | $200 | ||
| Total Needs Allocation – 60% ($4000 x 0.6 = $2,400) | $2400 | ||
| 2. | Wants (discretionary spending) | Amount | |
| Dining out | $300 | ||
| Entertainment | $200 | ||
| Personal care | $200 | ||
| Travel/Vacation fund | $400 | ||
| Hobbies | $100 | ||
| Total Wants Allocation – 30% ($4000 x 0.3 = $1200) | $1200 | ||
| 3. | Savings and Debt Payments | Amount | |
| Emergency fund | $100 | ||
| Retirement savings | $100 | ||
| Student loan payment | $200 | ||
| Total Amount: 10% for savings and debt repayment: $4000 x 0.1 = $400 | $400 |
In this example, Sarah allocates her income easily to 3 bigger categories in the 60/30/10 rule at the start of the month.
This ensures that she has enough money saved for her essential expenses.
She also has a fun quality life as she sets aside a good amount for her hobbies and personal care.
Take note that Sarah wants to pay off her student loan this year, so she makes sure to save at least $200 towards paying off the student debt.
She has enrolled in her company’s 401k plan and saves $100 extra every paycheck. Her employer matches 50% of her annual contributions to 401k.
She doesn’t leave this money on the table. Isn’t she smart?
Alright, now let’s take another example.
Example 2: Married Couple with a higher income and significant debt
John and Emily are a married couple with a combined monthly take-home pay of $8,000.
They have significant credit card debt and student loans, so their priority is to allocate more funds toward debt repayment.
| 1. | Needs ( Essential Expenses) | Amount | |
| Mortgage | $2400 | ||
| Utilities | $400 | ||
| Groceries | $800 | ||
| Transportation | $400 | ||
| Insurance | $800 | ||
| Total Needs Allocation – 60% ($8000 x 0.6 = $4800) | $4800 | ||
| 2. | Wants (discretionary spending) | Amount | |
| Dining out | $500 | ||
| Entertainment | $300 | ||
| Personal care | $200 | ||
| Travel/Vacation fund | $700 | ||
| Hobbies | $300 | ||
| Total Wants Allocation – 30% ($8000 x 0.25 = $2000) | $2000 | ||
| 3. | Savings and Debt Payments | Amount | |
| Emergency fund | $200 | ||
| Retirement savings | $300 | ||
| Credit Card Debt Payment | $500 | ||
| Student loan payment | $200 | ||
| Total Amount: 10% for savings and debt repayment: $8000 x 0.15 = $1200 | $1200 |
In this example, John and Emily adjust the percentages to allocate a higher portion (15%) towards debt repayment for credit cards and student loans.
This allows them to aggressively pay down their debt while still maintaining a reasonable lifestyle and contributing to their savings goals.
Even if they spend $500 every month now to pay off credit card debt, they still have enough funds saved for their retirement and emergencies.
They both are travel and fitness enthusiasts. Since their daily jobs are pretty busy and stressful, they make it a point to destress by going in regular vacations and their local gym.
They both are on the same page when it comes to spending money on entertainment and travel expenses.
Yet they only spend 25% of their total income on fun things that make married life special for them.
Imagine not having those stressful conversations about your next trip or hobbies with your significant other.
Who doesn’t want that?
Alright. Now see how a bigger family can use this 60/30/10 rule budget realistically.
Example 3: Family with a moderate income and high housing costs
The Rodriguez family consists of two parents and two children.
Mr. Rodriguez is a sales manager for a local food company. He earns a base monthly salary and also earns a commission based on his monthly sales numbers.
Mrs. Rodriguez is currently staying home to raise their kids and avoid high child-care costs in the city.
She has an online craft shop where she sells her designs and gets irregular income throughout the year. Crafting also helps her cut down on entertainment and travel expenses as kids love to create crafts with her.
Mrs. Rodriguez loves to cook from scratch and keeps the dining-out expenses pretty low.
They have high housing costs due to living in an expensive urban area.
They can not move to the suburbs for another 6-7 years until Mr. Rodriguez finds another job and the kids grow older.
Let’s take a look of the 60/30/10 rule budget for Rodriguez Family.
Over the last 6 months, they looked at their average monthly income from all sources and decided that they wanted to budget with a minimum of $5500 a month in income.
They also are worried about their kid’s future college expenses and their new home. They want to stop paying the high monthly rent and instead want to invest in a small condo in a few years.
| 1. | Needs ( Essential Expenses) | Amount | |
| Mortgage | $2200 | ||
| Utilities | $300 | ||
| Groceries | $500 | ||
| Transportation | $200 | ||
| Insurance | $375 | ||
| Total Needs Allocation – 65% ($5500 x 0.65 = $3575) | $3575 | ||
| 2. | Wants (discretionary spending) | Amount | |
| Dining out | $100 | ||
| Clothing | $50 | ||
| Hobbies/Kids’ Craft Activities | $400 | ||
| Personal care | $100 | ||
| Travel/Vacation fund | $175 | ||
| Total Wants Allocation – 15% ($5500 x 0.15 = $825) | $825 | ||
| 3. | Savings and Debt Payments | Amount | |
| Emergency fund | $200 | ||
| Retirement savings | $100 | ||
| NEw Home Fund | $400 | ||
| Retirement | $200 | ||
| Total Amount: 20% for savings and debt repayment: $5500 x 0.2 = $1100 | $1200 |
In this case, the Rodriguez family adjusts the percentages slightly to accommodate their high housing costs, allocating 65% to essential expenses.
They have bigger life goals such as Kids’ college and a new home in the next 6-7 years. This meant that they had to be smart with their savings strategy.
Luckily they do not rely heavily on credit cards. They use credit cards only for fuel and dining out as they get maximum cash back on those expenses. Every month, they pay off the credit cards in full.
Mrs. Rodriguez follows cash envelopes to stick to the family budget. Every month, she takes out cash from the back for their essential groceries, clothing, craft supplies, personal care, and dining out.
They meet as a family every week to discuss their fun family activities. Everyone shared their idea for fun crafts or an outing to a nearby inexpensive place. All discussions are centered on creative ways to have fun and save money.
Everyone in the family knows that they want to invest in a new home so they all agree to save 20% towards this goal and the kids’ college expenses.
A big success of this family comes from having fun with money management rather than stressing about money all the time.
Now, if the Rodriguez family manages to get another job with higher pay or get promoted to a better position to lead a local food store in the suburbs, they will have enough room to play with their income.
When the craft shop takes off successfully to make them consistent income, this budget rule can still help them tweak for a new change.
These examples demonstrate how the 60/30/10 rule budget can be tailored to different financial situations and priorities.
Try to find the right balance that works for you while adhering to the principle of allocating funds for essential expenses, discretionary spending, and savings/debt repayment
What is the easiest way to follow a 60/30/10 Budget rule?
Use the power of special benefits offered by your bank to automate fixed savings and fixed bill payments. This way you do not have to think about them every month.
E.g If your monthly bill of Internet service is $49, set this automayic bill payment in your bank.
After your fixed monthly expenses are set on auto-pay, set aside at least 10% of your income to go into a high-yielding savings account.
And then automate 10% of your saving to go to your savings account.
I recommend Ally Bank for it as they give better interest rates for their high-yield savings account.
You can also use the budgeting apps Mint and Pocketguard to make this budeting easier.
Related article: Create a budget in under 10 minutes
Final Thoughts on the 60-30-10 Rule Budget
The 60/30/10 rule budget is a powerful tool for managing your finances and achieving financial stability.
While the rule provides a solid foundation, it’s essential to tailor it to your unique circumstances. Adjust the percentages, prioritize specific financial goals, and account for irregular or variable income as needed.
Implementing the 60/30/10 rule requires consistent effort and discipline.
When you start following this budgeting rule, determine to track your expenses diligently.
Always make sure to categorize the expenses accurately, and make adjustments in allocation as needed. Over time, this budgeting strategy can help you develop healthy financial habits, reduce debt, build an emergency fund, and save for long-term goals like retirement or a down payment on a home.
Don’t be discouraged if it takes time to find the right balance or if you need to make adjustments along the way. Even if you can’t follow the rule every single month, don’t skip it. Start fresh from the next month. It takes at least 6-8 months to see the benefits from this budget rule.
Budgeting is an ongoing process, and the 60-30-10 rule provides a flexible framework that can be customized to suit your evolving needs.
So, why not give the 60/30/10 rule a try? Start by calculating your income and categorizing your expenses, then allocate your funds according to the rule. With time and consistency, you’ll be on your way to a more financially secure future.
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