The 70/20/10 budget: how the rule works and how to use it

The short answer: the 70/20/10 budget splits take-home pay into 70% for living expenses, 20% for savings and 10% for debt or giving. On $4,000 a month, that's $2,800 to live on, $800 to save and $400 for debt or giving.

• Living (70%): housing, utilities, groceries, transportation, insurance, minimum debt payments, fun money
• Savings (20%): a starter emergency fund, retirement, sinking funds and bigger goals
• Debt or giving (10%): extra debt payments, or giving once you're debt-free
• Start in five steps: find take-home pay, do the math, list living costs, automate the 20% and 10%, track the 70% weekly
• Next step: Plan it with the Budget Planner Printable ($5.99).

The 70 20 10 budget splits your take-home pay three ways: 70% for living expenses, 20% for savings and 10% for paying off debt or giving. On $4,000 a month after taxes, that's $2,800 to live on, $800 to save and $400 for debt or giving. It's one of the simplest budget rules there is, because you only track three numbers.

Our Budget Planner Printable has pages that match each bucket: a monthly budget for the 70%, a savings tracker for the 20% and a debt payoff tracker for the 10% if it goes to debt.

I'm the family coordinator type, the oldest of three from Detroit, and I like a plan that fits on one page. The 70/20/10 rule is exactly that.

How the 70/20/10 budget works

Start with take-home pay, the amount that actually hits your account after taxes and paycheck deductions. If you already save for retirement through your paycheck, you can count that toward your 20%.

70/20/10 budget examples by income

70/20/10 on a biweekly paycheck: $2,000 example

If you're paid every two weeks, run the same math on each paycheck. A $2,000 biweekly paycheck becomes $1,400 for living costs, $400 for savings and $200 for debt or giving.

Keep in mind that 26 biweekly paychecks a year means two months have three paychecks. Many people plan the 70% for rent and bills around the two-paycheck months and send the third check to savings or debt. Our Paycheck Budget Spreadsheet ($5.99) assigns each bill to the right check.

What goes in each bucket

The 70%: living expenses

This bucket holds needs and wants together. That's the big difference from other rules. Rent, the electric bill, groceries and gas live here, and so do takeout, streaming and a new pair of shoes. Minimum payments on your debts belong here too, because they're a bill you have to pay.

Because everything shares one bucket, you get flexibility. If rent is high, you trim wants. If you have a cheap month, you have more room for fun.

The 20%: savings

Fill these in order:

1. A starter emergency fund. The CFPB's guide to building an emergency fund suggests setting a savings goal, starting small and making consistent contributions, with automatic recurring transfers often one of the easiest ways to save.
2. Retirement. At least enough to get any employer match.
3. Sinking funds. Save monthly for known costs like Christmas, car repairs, back-to-school and annual bills. Read more in sinking funds.
4. Bigger goals, like a down payment or a full emergency fund.

The 10%: debt payoff or giving

If you carry credit card or other high-interest debt, this 10% goes on top of your minimum payments. The CFPB's How to reduce your debt explains two common ways to aim it: the highest interest rate method and the snowball method, which starts with your smallest debt. Compare them in debt snowball vs. avalanche.

Once you're debt-free, the 10% can go to giving. My Christian faith is important to me, and for many families of faith a 10% bucket is a natural fit for tithing and generosity. If giving is your priority, see how to budget for charitable giving.

70/20/10 vs. 50/30/20

Both rules save 20%. The 70/20/10 rule simply adds a dedicated 10% for debt or giving and stops splitting needs from wants. If you want a separate wants limit, read our guide to the 50/30/20 budget.

How to start a 70/20/10 budget in 5 steps

1. Find your monthly take-home pay. Use your average if it changes. For variable pay, see how to budget with irregular income.
2. Do the math. Multiply by 0.70, 0.20 and 0.10.
3. List last month's living expenses. Check bank and card statements and compare the total with your 70%.
4. Automate the 20% and 10%. Schedule transfers to savings and extra debt payments on payday, so they happen before you spend.
5. Track the 70% weekly. If you're on pace to go over, trim wants first.

When 70/20/10 doesn't fit (and what to do)

• Living costs are over 70%. Start at 80/15/5 or 85/10/5 and move one step each time you cut a bill or get a raise.
• You have a lot of high-interest debt. Try 70/10/20 for a while: a smaller emergency fund and more toward debt.
• You want every dollar assigned. A zero-based budget gives every dollar a job, and you can still use 70/20/10 as your targets.

Track your 70/20/10 budget on paper

Three numbers are easy to remember, but spending is easy to forget. The Budget Planner Printable ($5.99) has 12 undated pages, including a monthly budget, expense log, savings tracker, sinking funds page and debt payoff tracker. Print a fresh set every month.

Put the 20% and 10% to work

For your 10%, the Debt Payoff Planner Spreadsheet ($6.99) lets you pick snowball or avalanche, add your extra payment and see your debt-free month. For your 20%, the Sinking Funds Tracker ($4.99) shows how much to set aside each month for up to 20 savings goals. Both work in Excel and Google Sheets.

Get the full budgeting set

The Ultimate Budget Bundle ($19.99, $46.42 if bought separately) includes all three tools above plus the Annual, Zero-Based and Paycheck Budget Spreadsheets and two bill trackers. Browse all money planners.

See also

• Pay yourself first
• Budgeting for beginners
• Budget categories list
• Emergency fund tracker
• How to stick to a budget