The 60 30 10 rule budget is the newest, most innovative substitute to the 80 20 rule. Over the years, we’ve seen that budgeting is the most helpful and resourceful tool a person can have when dealing with personal finance. But with so many budgeting methods out there, it can be hard to know where to start. There are so many methods that people are left confused about what budget rule to follow.
We’re here to explain the 60 30 10 rule budget, how to get started, and help you figure out if this budgeting method is a realistic one for you.
What Is the 60 30 10 Rule Budget
Before you even start budgeting, you have to research a budgeting method to know what you’re doing. Budgeting by percentages is a great way to save money and reap the benefits of paying off debt. While each budgeting method focuses on different objectives, the 60 30 10 rule is best for those who look to save money.
By allocating 60% of your income into savings, you become more flexible with your finances. The remaining 30 and 10% are split into needs and wants. This budgeting method is excellent at preventing you from spending too much on stuff you want. Instead, it helps you save money while also paying necessities such as bills and food. If you’re struggling to save money even if you’re using the best savings tips out there, the 60 30 10 rule budget will help you do just that.
How To Get Started With the 60 30 10 Rule Budget
Now that we’ve outlined what exactly is the 60 30 10 rule budget, let’s look at how to start. Execution is key with budgeting. Regardless of what method you’re going with, it’s essential to be in the right mindset.
Execution of any budgeting method can be hard at first. Considering that 54% of the US population lives paycheck to paycheck, saving 60% of your income can prove challenging to most. So the right way to start with the 60 30 10 rule budget is to understand that you’re playing the long game.
Let’s see what you can do to make the 60 30 10 rule budget work for you.
How To Make the 60 30 10 Rule Budget Work For You
The goal of this budgeting method is to help you save money, start investing and help pay off debt. Financial experts believe that you can allocate 60% of your income and achieve your financial goals with this method.
But it depends on what your goals are. If your goal is to get out of debt, then put 60% of your income into paying it off. Let’s say that your income is roughly $5,000. By doing simple math, 60% of $5,000 is $3,000. That amount of money can help you drastically speed up loan repayments.
If your goal is to have a sizeable investment portfolio, putting 60% of your income into stocks, bonds, REITs, etc., will help you do that. And if your goal is to save money in a savings account, putting $3,000 will hopefully help achieve that. Racking up huge savings can help you achieve your dreams. If your dream is to stop working and do what you love, the 60 30 10 rule budget will help make that a possibility.
So How Do You Make It Work?
So, how do you make it work for you? As we discussed, the first step is to determine what the goal will be. Next up, figure out the total amount of all of your income(s) and divide it by 60%. The remaining 30 and 10% will go into needs and wants. If you’re confused about what ‘needs’ and ‘wants’ mean, allow us to simplify it for you.
Needs include stuff like housing, utilities, food, transportation, and healthcare. These are stuff you need to pay for. Wants, on the other hand, are discretionary spending. It includes stuff like travel, new clothes, entertainment, going outs, and more. These are stuff you don’t depend on. You can live without a new pair of shoes, but you can’t live if you don’t buy food.
Is the 60 30 10 Rule Budget A Realistic One?
Since saving/investing/paying off debt is the main focus of the 60 30 10 rule budget, let’s see if this budget method is a realistic one. Saving is at an all-time high in the US. According to Statista, the personal saving rate in the US is 13.7%. While this number might reflect quite poorly, it is the highest ever since the 60s. In 2019, the personal saving rate was just 7.6%.
So the saving rate has nearly doubled in one year. While 2019 was quite an abysmal year for the US, the decrease in unemployment has certainly made things easier. Americans are saving now more than ever, and the 60 30 10 budgeting method is great for that.
Debt, on the other hand, is at an all-time high. In 2019, the debt per capita was $69,063. In 2020, the debt per capita increased to $80,885. So while Americans are saving more, the debt is rising. This is a prominent issue in the US, and the answer looks nowhere to be found. By allocating 60% of your income towards paying off debt, you put yourself in a much better financial position.
To answer whether or not the 60 30 10 budgeting method is a realistic one, you have to determine if you have the means and resolve to save 60% of your income. If the answer is yes, then it is definitely a realistic one.
Why Should You Do It?
Budgeting by percentages does have its pros, but also its cons. This type of budget method can do wonders when you have the means to allocate a percentage of your income into certain categories. It also comes in handy when living paycheck to paycheck. However, you do need to take more steps to make that a reality. For example, you need to start tracking your spending and start eliminating needless spending. Once you do that, allocate what’s left of your income into those three categories – saving, paying off debt, and investing.
Once you get your finances in order, you can start allocating a greater percentage. Sooner or later, you’ll make it possible to put 60% of your income into these three categories. If you’re having a difficult time controlling your finances, then we suggest you take a look at Dave Ramsey’s seven baby steps. His method is great for helping get out of debt and putting in the infrastructure to start saving and investing.