There are two things people would agree about saving: (1) it is good, and (2) it is difficult to do. As a solution to the second statement, the 70-20-10 saving rule might be the answer.
Accordingly, the 70-20-10 rule is among the easiest rules out there that allows people to budget their needs in a month. Also, it is implementable for a long-term use, even after you are about to reach your retirement age.
In all actuality, the 70-20-10 is highly suitable for those who have a high amount of living expenses yet they want to save money. The rule makes it possible to fulfill short-term and long-term goals, emergencies, and even retirement.
Basically, the rule divides the monthly income to three different sections, being 70, 20, and 10. Accordingly, they are living expenses, savings, and debts respectively.
How to Do 70-20-10 Saving
According to the aforementioned explanation, you need to divide your income to three different aspects at first. They are 70% living expenses, 20% savings, and 10% debts.
Indifferent from other living expenses, the 70% covers expenses such as food, living spaces, gasoline, and so forth. In short, this includes any expenses that you need in order to survive in a whole month.
Furthermore, the next 20% is savings. Accordingly, the 20% includes 10% for retirement saving, 5% for emergency funds, and another 5% for specific goals. The goals can be either short or long term.
Last but not least, the 10% should be used to pay off debts. Some examples of debts are student’s loans, mortgages, and credit cards.
In addition, the 70-20-10 saving rule is very flexible. Each percentage can be adjusted by suit your particular needs. For instance, you may increase your living expenses to 75% if you need more. You can take the 5% from your saving allowance.
Writer: Doddy D. Wahyuwono