The 70/20/10 rule for money management

When I started at my first job and would get paid, I would pay my expenses off first and then had no idea what do with the rest of my money. Some of my friends would blow their money on non-essentials first and then would save the rest for their bills. I am not going to lie I was a little guilty of doing that myself sometimes.

Basically, I needed to apply a little bit of structure in my life when it came to money allocation. So, what’s the best way split up your paycheck? There are a lot of different methods out there but I’m going to let you in the 70/20/10 rule which is an off shoot of the 50/30/20 rule popularized by Elizabeth Warren which I personally think is a little unrealistic if you live in a major city like me or have way to many family members (please don’t tell her I said that). So how does it work?

70% – Living expenses (rent, food, clothing, bills, debt, miscellaneous expenses, etc.)

20% – Savings (can be allocated to different savings accounts and or specific goals like a new car)

10% – Retirement (Roth IRA, Brokerage account, etc.)

I believe this approach is much more doable by the everyday person when you’re starting out. It will give you breathing room to support family and take on additional necessary expenses. And best of all you can still fund your retirement. As your salary grows and you have less expenses over time you can feel free to adjust the percentages.

You may be concerned you’re not saving enough for retirement with this method but if you start doing this early you will be fine. And again, you can adjust this as you grow in your career. The most important thing is you find and build what works for you and the 70/20/10 method is a great start.