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Master Your Finances With The 60 30 10 Rule Budget

10 min read
Last Updated on 30 March, 2023

The 60-30-10 rule is a simple budgeting strategy that employees can use to manage their finances.

This rule provides a basic framework to help ensure that an employee's expenses are balanced and sustainable. Following the 60-30-10 rule, employees can establish a healthy financial foundation and plan for their future.

This budgeting form is intended for those who can control their impulsive buying behaviors and choices and save 60% of their money for a brighter tomorrow.

What is the 60 30 10 Rule Budget?


Your take-home pay is split into three areas in a 60-30-10 rule budget. Take-home pay refers to your gross income after withholding income tax, perks, and other expenses.

Calculate your annual salary. Include your normal salary, revenue from side jobs, renting or other passive income, and more. Multiply that sum using the 60-30-10 budget guideline.

According to this rule, 60% of an employee's income should be saved or invested. 30% should be allocated to necessities such as housing, food, and transportation. And the remaining 10% should be allocated to personal expenses such as entertainment, clothing, and hobbies.

As an illustration, if you made $10,000 per month from your job plus a side business, you would save $6000, or 60% of that amount.

Taking 30% of $10,000, or $3,000, would go toward needs.
And only $1000 out of the entire $10,000 would be spent on wants.

60% On Savings


Firstly, the major part of your income, that is, 60%, will be allocated to savings or debt repayment.

For example -

  • Emergency Funds
  • Investing in Real Estate
  • Student Loans
  • Car Loans
  • Sinking Funds (Down Payment Funds, Vacation Fund, etc.)
  • Savings
  • Retirement accounts
  • Investing accounts
  • College savings plan
  • Save money for a down payment on a house

30% On Needs


The other 30% of your income will cover your essential expenses, including everything you can't live without.

For example -

  • Mortgage or Rent
  • Housing utilities and food transportation
  • Food- Groceries (excluding dining out)
  • Insurance
  • Gas
  • Basic necessities
  • Phone
  • Utility Bills
  • Debt Repayment
  • Health Care
  • Child Support
  • Other necessary expenses

10% On Wants


Last but not least, 10% of your money will be allocated to wishes or anything that you love but is unnecessary.

For example -

  • Restaurants
  • Entertainment- movies, concerts, plays, etc.
  • Shopping
  • Subscription Services
  • Vacations
  • Cell phone
  • Cable
  • Internet
  • Travel
  • Dining Out
  • Streaming Services
  • Memberships
  • Non-essential expenses

Why Should You Budget By Percentages?

For people who dislike budgeting, using percentages may greatly ease the process.

Read: Financial Stress : A Big Deterrent On Employee Wellness And Work

For Whom Is The 60 30 10 Rule Budget Ideal For?


The 60-30-10 rule can be more practical, particularly for individuals with salaries. This budgeting method is also excellent for experienced employees who can give up a lot of their earnings to save them and invest in other financial areas.

You can use the 60-30-10 rule budget if you:

  • Don't rely on paycheck to paycheck.

  • Set significant financial objectives, such as purchasing a house and paying off a sizable debt.

  • Are interested in investing the majority of your salary.

  • Aspire Financial Independence Retiring Early (FIRE).

  • Wish to establish a sizable emergency fund.

Read: No-buy Challenge: 5 Ways To Boost Your Financial Well-Being

How to Get Started with the 60 30 10 Rule Budget?


If you want to use the 60-30-10 Rule Budget to assist you in reaching your financial objectives, it is simple to get started.

It begins with totaling your income and determining how much you intend to spend and save each month.

You may categorize your spending into the three categories of savings, needs, and wants after you have a foundation of what you typically spend your money on. You may allocate the proper portion of your funds to the various categories once separated.

1. Adding your income


When calculating your income, consider any money you get after taxes. You can get this money through a regular 9 to 5 job, side jobs, contract work, child support, stimulus payments, or even money you make from apps.

If you are a contract worker or otherwise uncertain of your future employment, you should save for the taxes you will owe later to avoid a nasty surprise.

You must modify your budget per your circumstances because some people receive weekly or monthly payments.

However, it would be best to consult a tax professional if you have any issues.

You can create a customized budget template to ease your calculations.

2. Figure out your spending and what you need to pay for


Step two might be challenging if you've never created a budget before. But take the time to sit down and review your recent spending. To simplify things, many banks have applications or online banking facilities that allow you to go back over the past year and see what you have bought.

Make a list of everything, from groceries, dining out, student loans, and travel to mortgage payments. You may keep track of your expenditures and make it easier to manage by using an online or printed spreadsheet.

3. Set Up Your Financial Goals


After calculating your expected revenue, allocating it among the various categories, and classifying your outgoings, you must define financial objectives.

No budgeting is worthwhile if you lack the will to go forward and achieve your financial goals you set at the start of each month. You must establish certain monetary objectives for every month.

A few examples are purchasing a home, paying off a sizable loan, or setting up an emergency fund.

4. Divide everything into categories


To begin, you can categorize everything into three groups: savings, needs, and wants. Now you have a list of your critical spending and your savings objectives. The simplest method is starting with your fixed costs and moving on to your savings.

Your wants will be based on what is left over. Do not forget that each category will receive a portion of your paycheck: 60% will go to savings, 30% to necessities, and 10% to wants.

Ensure you have enough to meet your requirements before adhering to this budget rule. The budget will be pointless if you cannot pay your rent or utilities, even if you want to attain your financial goals quickly.

5. Evaluate And Adjust Your Spending

Your budget for yourself or your family will need to be reviewed and adjusted twice. To make sure you stick to the percentages of each area and don't go over budget, check your spreadsheet first and make any necessary revisions.

The second time you should assess is at the end of each month to analyze what went well and poorly to make additional modifications.

You must review and tweak your budget each month. You won't do everything right on the first try, so don't be discouraged if you fail or things don't go as planned. Even experienced budgeters still make mistakes after years of planning.

Pros And Cons Of The 60 30 10 Rule


The 60-30-10 budget will not be a good fit for everyone. Here are the pros and cons of this budget:

The Pros of the 60 30 10 Rule Budget

1. Helps you move more quickly toward your financial objectives


The biggest benefit of using the 60-30-10 rule budget is that it speeds up the process of reaching your financial goals. As this budget advises, invest or save the bulk of your take-home salary. Doing so helps you accomplish your objectives more swiftly.

This budget will be very helpful to anyone trying to save money or pay off debt actively. You can achieve your goals more quickly by adhering to this budget.

2. Assists You In Reducing Unnecessary Spending


You will be more frugal with your expenditures since you will save 60% of your income. Consequently, you will spend less on frivolous items and put more emphasis on your requirements.

3. Prepares for emergencies

The 60-30-10 rule budget enables you to save aside a sizable portion of your income. Your savings will grow monthly, and you can utilize them for emergencies.

A sizable emergency fund is the most helpful thing in a crisis. Increase your savings and emergency fund balance.

4. Motivates You To Boost Your Income


Your spending patterns will change if you strictly adhere to the 60-30-10 budget guideline. As a result, you will concentrate more on increasing your income to maintain your current level of expenditure.

You'll be motivated to find methods to grow your income and savings if you concentrate on saving as much money as possible.

5. It Makes You More Financially Disciplined

Self-discipline is the secret to success in everything, whether a new fitness regimen or a new spending plan. Your financial situation is rearranged and made more disciplined using the 60-30-10 rule budget. Thus, you get greater financial literacy and experience less financial stress.

The 60 - 30 -10 rule budget also has some additional benefits, such as allowing you to save more for retirement and get toward financial independence more rapidly.

This budget might assist you in developing self-discipline if you are tenacious and diligent.

The Cons Of The 60 30 10 Rule Budget

The 60-30-10 rule budget has the following key drawbacks:

1. Very difficult to follow

Though it's a wise financial strategy, most individuals will find it difficult to adhere to because the emphasis on spending is reduced.

This budgeting approach is highly challenging, especially if you are used to splurging lavishly on demands and don't want to make cuts.

You should drastically alter your spending patterns to stick to this budget.

2. Maintain a Low-Cost Lifestyle

Reducing living expenditures might hurt you because of the growing inflation. So, if you don't make a good living, don't try the 60-30-10 rule.

Maintaining your spending on basic requirements at 30% of your income may be particularly challenging for you if you live in a location with a high cost of living and pay a large rent or mortgage.

3. Not Suitable For All

It may be a sensible spending strategy. But it may not be appropriate for everyone, though. This budget may be difficult or impossible for you to stick to if you make a very low income or live paycheck to paycheck.

Who should use the 60 30 10 rule budget?


The 60-30-10 budgeting guideline places a higher priority on saving money than on spending. It's not a budgeting approach that works for every situation due to the high percentage allotted to savings or debt repayment.

For instance, this strategy isn't advised if you are beginning your first budget. A zero-based budget that holds you highly accountable for every cent of revenue will serve you better. You will have greater control over your financial management, even if it is a more sophisticated budget.

Additionally, you should choose a budgeting method that allows for a greater percentage of household spending if you struggle to make ends meet and live paycheck to paycheck. Making sure you can pay your bills is more important than setting aside the majority of your income for retirement.

However, you should consider this ambitious plan if you have been budgeting for some time and are ready to refocus your financial efforts on saving more money and eliminating debt.

Or, use this budgeting principle to assist you in meeting a significant financial objective as soon as feasible.

You will need to make some budgetary cuts and reduce your discretionary spending if you plan to put more than half of your take-home pay toward debt repayment and savings. Make sure you are prepared to sacrifice before implementing this budgeting strategy with your money.

What If Your Needs Cost Too Much?


Your home or vehicle's high cost is the main factor that would cause you to panic about a 60% savings rate. In this situation, your choices are two.

  1. Change residences or get a new vehicle that is more reasonably priced. These are undoubtedly significant steps, and depending on where you reside, they may be simple or difficult. However, if you reduce your primary requirements, you'll spare yourself years of frugal living and free up a ton of money.

  2. Suppose the above point is out of the question. Transfer part of your funds from the wants category to the needs category. But keep your hands off the 60% savings. It depends on your priorities and circumstances in life to know which one works better.

A Word From Us

Concentrating your efforts on raising your savings may make you the best saver you can be. This has the wonderful benefit of making your money grow over time, especially if you invest.

You won't ever have to worry about going into debt, and you'll be able to enjoy a more comfortable, debt-free life!

Good luck with your finances!

Frequently Asked Questions (FAQs)


1. What should the 60% of total income be used for in the 60-30-10 rule budget?

The 60% of the income in the 60-30-10 rule budget should be used for savings or debt repayment, such as emergency funds, real estate investments, student loans, car loans, retirement accounts, college savings plans, etc.

2. What should the 30% of total income be used for in the 60-30-10 rule budget?

The 30% of the income in the 60-30-10 rule budget should be used for necessities such as mortgage or rent, housing utilities, food, transportation, insurance, basic necessities, utility bills, debt repayment, etc.

3. What should the 10% of total income be used for in the 60-30-10 rule budget?

The 10% of the income in the 60-30-10 rule budget should be used for personal expenses such as restaurants, entertainment, shopping, vacations, cell phone, internet, non-essential expenses, etc.

This article is written by Ritushree R Singh, who is a content writer and marketer at Vantage Circle. Besides having a curious heart with an avid taste for music, she relishes traveling to new places and exploring different cultures whenever possible. To get in touch, reach out to editor@vantagecircle.com

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