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The 60 30 10 rule budget is a simple but highly structured budgeting strategy. It is a budgeting tool for people striving to achieve their long-term goals and to help individuals overcome their impulsive spending habits. The 60 30 10 rule budget achieves this by encouraging individuals to put aside 60% of their income for a better tomorrow.

This article will go over the 60 30 10 rule budget and explain why it is the perfect budgeting tool for long-term goals and impulsive spending.

What Is The 60 30 10 Rule Budget?

• 60% of your income will be allocated to your investment portfolio, savings account, and paying off debt.
• 30% of your income will be allocated for living expenses. This includes rent, food, bills, transportation, or any other priority needs, like pharmaceutical needs, food for your pet, etc.
• The remaining 10% of your income is free to spend on anything you’d like. This includes getting a haircut, shoes, a weekend somewhere nice, a dinner, or simply a night out.

Let’s add more clarity through an example. Let’s say your take-home pay is $7,000. Judging by the framework of the budgeting strategy, 60% of your pay should be invested, saved, or used to pay off debt. That equates to $4,200. 30%, or $2,100, of your income should cover necessities, while the remaining 10%, or $700, goes to personal expenses.

Is The 60 30 10 Rule Budget Right For You?

We can’t stress enough that this budgeting rule is made for people with strong wills who are dedicated and disciplined enough to save or invest 60% of their monthly income. The 60 30 10 rule budget has a single goal – making tomorrow easier and better.

To keep up with the 60 30 10 budget rule, you will have to quit certain wants and guilty pleasures, and you will have to say NO more frequently than you are used to. You might have to skip that new movie at the cinema, say no to your friends when they call you for a drink two nights in a row, or go to that museum you wanted to visit. Instead, you will be solely focused on improving your personal finance.

This sounds quite strict, but the 60 30 10 budget rule will make your life much easier. The 60 30 10 budget rule enables more money to be saved or appropriately invested. It will help you achieve the goals you’ve always wanted, such as becoming a homeowner, being prepared for dark days, or putting your kids through college.

At the end of the day, it’s a simple decision, do you want a better today or a better tomorrow?

Advantages And Disadvantages Of The 60 30 10 Rule Budget

As with any budgeting method, it all comes down to comparing the advantages and disadvantages to make a decision. The 60 30 10 rule is similar to others in that view. Therefore, here are the advantages and disadvantages of the 60 30 10 budgeting rule:

Advantages Of the 60 30 10 Rule

• You will have enough money saved if anything unfortunate happens to you in the future.
• Investing a large portion of your money will help you better cope with inflation, and good investments and trades will help you grow a serious portfolio.
• The discipline you will acquire from the 60 30 10 budgeting method will follow you for the rest of your life. You will truly learn the value of money, one of the best personal finance habits anyone can have.
• It is primarily a budgeting tool for long-term growth and wealth creation, so it takes time to pull off.

Disadvantages Of the 60 30 10 Rule

• Saying, “I can’t,” becomes a habit. But remember that the goal is to save money. You might miss out on some nights out and experiences because of that.
• 10% sometimes might not be enough to “live your best life.” It might mean not being able to buy a piece of clothing or traveling that often.

Other Types Of Budgeting

The 60 30 10 budget isn’t the only budgeting rule out there. There are plenty of other budgeting options that might do wonders for you. Here are a couple of different budgeting rules for you to consider:

• The 70/30 Rule for budgeting. This rule is simple. Essentially, it says that 70% of your income can be spent on your necessities and wants. But 30% will go into your savings account. How you allocate that 70% is up to you. Sounds easier.
• The 50/30/20 budgeting rule. This budget allocates 50% of your income to your needs, accommodation, bills, food, etc., and 30% to your wants, including new t-shirts, shoes, a week on the beach, or whatever you feel like. The remaining 20% proceeds into your savings account or pay off your debt.
• The 50/15/5 budgeting rule. This budgeting method allocates 50% of the income to your living expenses and essential needs, 15% to savings, and 5% to an emergency fund. Butt that doesn’t add up to 100%. The 30% left will be allocated to your wants; you can spend it on whatever you like.

Is the 60 30 10 Rule Budget For You?

Budgeting tools are numerous and vary, as mentioned in the previous section. Therefore, before you decide on the 60-30-10 rule budget, you must determine if it is right for you. Here are a few points that best illustrate if the 60 30 10 rule budget is for you:

• You don’t rely on living paycheck to paycheck.
• You have clear goals for the future, such as buying a house, a car, getting out of debt, growing an investment portfolio, etc.
• You have a large enough income to put aside 60% toward achieving these goals and targets.
• You want to become financially independent and retire early.
• Your primary interest is to save or invest your money.
• You want to be ready for any financial emergencies life throws at you.

If you fulfill some or most of these points, the 60 30 10 rule budget is for you. Even if you’re not ready to allocate 60% of your income towards a goal, you can always be flexible and modify the rule to best suit your financial power.

How to Get Started With the 60 30 10 Budget?

Using a budget strategy to reach your financial goals and targets is simple. All you need to do is follow these steps:

Step 1: Calculate Your Income

Calculating your income is the first step to using the 60 30 10 rule budget. Bear in mind that you must do the calculations after tax. To begin, add all of your monthly income. This includes income from your primary job, side hustles, and other sources, such as renting an apartment. 

Step 2: Calculate Your Spending

Similarly, you must calculate how much you spend and on what. Doing this is tricky, as we’re never fully sure where our money goes unless we pay strictly with a card. Nevertheless, it’s something you have to figure out. You can log in to your bank account and go back a month to calculate your credit/debit card spending. If you’re paying with cash, review your receipts to gain a somewhat full picture. 

Step 3: Set Up a Financial Goal

The most crucial step to using the 60 30 10 rule budget is to work towards achieving a financial goal. But to do that, you must first have a financial goal in place. So, start by outlining a big financial goal you wish to accomplish. A few examples could include:

• Buying a home
• Paying off a big loan
• Getting out of debt
• Setting up a sizeable emergency fund
• Putting the kids through college

Step 4: Categorize Into Three Groups

By now, you probably have a rough picture of how much you earn versus how much you spend. So in this step, we will focus on where your money should go. To do that, categorize your money into three groups. Those are:

• Savings, investments, and paying off debt

Remember that you should put 60% of your income into this group. 

• Necessities or Living Expenses

This should account for at most 30% of your income. If it goes above 30%, look for ways to cut on necessities. While that might sound difficult, an example would be canceling subscriptions, reducing electricity usage, lowering housing expenses, etc. 

• Wants

The “wants” group accounts for money you can spend on stuff you want for yourself. Despite wanting to achieve your long-term financial goals, treat yourself to nice things occasionally, but make sure it doesn’t exceed 10% of your income. 

Step 5: Evaluate Each Category

We’re not done yet; you’ll need to evaluate each category once or twice before making it stick. This is the step that helps you determine if you can stick to the percentages of the budget. 

Creating a budget isn’t easy, as you’re never 100% certain of your spending and income, especially if you’re also working part-time or have a business on the side. So give yourself a month to work on the budget and analyze areas to scale down. 

After the “trial” month, review the budget again and make it stick. Don’t be afraid of failure, as personal finance is anything but easy. Review your new budget monthly and learn to eradicate past mistakes to ensure compliance with your new budget. 

Wrap Up

That concludes our short explanation of the 60 30 10 rule. The 60 30 10 rule might sound unrealistic, too strict, or simply a burden. But for people who want to achieve their long-term financial goals and objectives and are disciplined, the 60 30 10 rule budget is the perfect budgeting rule for an easier tomorrow.

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