The 30-30-30-10 Budget: 5 Steps To Save More Money

Person calculating 30-30-30-10 budget

What is the 30-30-30-10 budget?

If you want to start saving for retirement  and paying off debt, then you might want to start using the 30-30-30-10 budget method with your finances.

This simple approach to budgeting prioritizes savings and debt payoff, and can help you reach your budget goals faster than other spending plans.

In this post, I’ll go over exactly what the 30-30-30-10 budget rule is, how to use this strategy with your finances, and help you decide if it’s the right budget for you.

Here’s what you should know about this simple but effective budgeting plan.

Grab this FREE 30-30-30-10 budget template, and start crushing your money goals!

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How does the 30-30-30-10 budget rule work?

The 30-30-30-10 rule budget uses four spending categories to manage your finances. Each percentage determines what portion of your income will be applied to which category.

First, 30% of your after-tax income will be dedicated to homeownership expenses, such as your mortgage payment or monthly payment for rent.

The next 30% goes toward necessary expenses. This includes your utility bills, food budget, insurance, transportation, etc.

Another 30% is for building a cash cushion of savings and paying off debts.

Finally, the last 10% of your net income can be spent on unnecessary costs, such as money towards entertainment, vacations, and dining out.

As you can see, this 4-fold breakdown is a budgeting solution that could simplify your money management. It’s also very effective at helping you increase your savings rate and reduce your debt balances.

Who should use the 30-30-30-10 budgeting system?

The 30-30-30-10 budget prioritizes the financial goals category over fun spending. Because of the larger percentage allocated to savings or debt payoff, it’s not a budgeting style that is suited for everyone’s circumstances.

However, the 30-30-30-10 budget rule can be very helpful for those who need spending limits so they can reach their financial goals faster. The percentages for each category can help keep you from overspending on unnecessary costs, as well as your housing expenses.

If you’re ready to shift your financial priorities toward saving more and paying off your debt, then you should definitely consider this budgeting strategy.

Dedicating 30% of your net annual income towards savings and debt may require you to cut some costs and lower your discretionary expenses. Before you start using this budgeting approach, be sure you’re willing to make the adjustments it requires.

What are the pros and cons of the 30-30-30-10 budget?

As with all budgeting methods, there are advantages and disadvantages to the 30-30-30-10 budget rule. Let’s go over what those are.

Benefits of the 30-30-30-10 budget system

One of the greatest benefits of this strategy is its simple structure. You don’t have to be concerned with how you spend every dollar like the zero-sum budget. Instead, you only need to be concerned with four percentages, which means you’re only dealing with four major budget categories.

As long as you can keep track of these four categories, the 30-30-30-10 rule is easy to use.

Another benefit to this simple spending plan is its effectiveness in achieving financial objectives faster. This is especially important for those who are behind on their retirement savings, have no emergency fund, or need to get out of debt quickly.

A third advantage of this money management strategy is it will help you to control spending habits that are wasting your income. You’ll need to be diligent and selective about how much you spend on unnecessary items. You may also need to get creative with lowering your household bills. Both adjustments will teach you what your money values are.

Finally, the purpose of using this type of budget is so that you’ll increase savings, build a thriving portfolio, and get out of debt. Those are all very profitable benefits to using the 30-30-30-10 budget method.

Disadvantages of the 30-30-30-10 budget

As mentioned before, this budget is not the optimum choice for everyone. With only 10% allocated to discretionary expenses, it can be a challenging method to maintain and might seem too restrictive for some people.

One downside is you’ll have less to spend on extra stuff – like eating out at your favorite restaurants, going on vacations, buying new clothes, etc. This might be a big adjustment to your current lifestyle and spending habits – possibly one you’re not willing to make.

You may also realize that you have to cut your household expenses. If your monthly rent payment alone takes up over 30% of your take-home income, are you willing to move to more affordable housing? The sacrifices you need to make might be too high.

Another downside to this method is that it’s very difficult for someone who lives in a city with a high cost of living. If you live in a high-cost area like New York City or San Francisco, you may not be able to keep your housing costs below 30%.

Also, if you need more details to manage your money well, then you may find the 30-30-30-10 method frustrating. With only four categories to track, there can be a lot of “gray” areas without the structure you desire.

Budget example: how to set up the 30-30-30-10 savings method

Setting up a 30-30-30-10 budget for your own finances is very straightforward:

  1. Calculate the total amount of your monthly income after taxes.
  2. Determine the dollar amount for each percentage category: 30%-30%-30%-10%
  3. Confirm that you can cover your housing costs and necessary monthly expenses each with 30% of your net income.
  4. Decide if you’re willing to reduce your discretionary spending to 10%.
  5. Allocate your income to each category every month.

Let’s go over each step in detail.

Step 1: Add up your total monthly take-home pay

This is where it all starts.

Your monthly take-home pay is what you receive after all taxes and deductions are taken out. Be sure you include all sources of income (employment income, side hustles, dividends, child support or alimony, any inconsistent income, etc.).

If you have an hourly job, get overtime, or receive some type of quarterly or biannual income, then your monthly after-tax income will vary. No matter how much you bring in each month, you’ll apply the same percentages in your budget.

Here is an example:

  1. Monthly take-home pay from full-time job = $6,000
  2. Monthly net income from side hustle = $1,000
  3. Monthly child support = $500

Total of all monthly income streams = $7,500

Step 2: Divide your total net monthly income into the budget categories

Once you have the total of your monthly net income, calculate each percentage.

Using the example in step 1, this would be the breakdown of your net monthly income:

  1. $7,500 x 30% = $2,250 for housing
  2. $7,500 x 30% = $2,,250 for necessary expenses
  3. $7,500 x 30% = $2,250 for savings and debt payoff
  4. $7,500 x 10% = $750 for discretionary spending 

Step 3: Confirm that 30% can cover your mortgage payment and necessary monthly costs

Once you know the dollar amount of each percentage category, you’ll need to decide if 30% is enough to cover your housing costs. For many, this will be their mortgage or monthly rent payment. However, you should add other essential costs such as HOA dues, homeowner’s insurance, property taxes, annual maintenance costs, and any other expenses associated with your housing costs.

Next, determine if 30% of your net income will cover your monthly necessary expenses. These costs are non-negotiable. Here is a list of possible basic expenses (aside from mortgage or rent) that you’ll need to cover:

  • Groceries
  • Health and auto insurance
  • Utilities
  • Essential clothing
  • Transportation costs
  • Child care expenses
  • Minimum debt payments (any extra payments would go into a separate debt repayment bucket)

Add up your monthly necessary expenses to confirm they are equal to or less than 30% of your take home pay. If they aren’t, you’ll need to lower some of those expenses before you can start using the 30-30-30-10 budget method with your finances.

Step 4: Determine if you’re willing to reduce discretionary spending to 10%

You might be surprised at how limiting a 10% discretionary budget amounts to, so it’s important to decide if you’re willing to make some sacrifices.

Some extra costs you may want to spend this money on could be:

  • Entertainment (movies, concerts, etc.)
  • Dining out
  • Additional clothing
  • Vacations
  • Hobby expenses
  • Subscription fees (gym membership, streaming services, etc.)
  • Recreational activities

Use a budget tracker to record your spending for 30 days to get a good idea how much you currently spend on unnecessary purchases. Refer to bank statements and credit card statements to make your calculations accurate.

How much do you spend on eating out, new clothes, going to the movies, etc? Compare this number to your 10% amount, and decide if it’s a limit you’re willing to commit to.

If you are diligent with keeping this budget method, you will be able to apply $27,000 of your income to savings and/or debt within one year!

Step 5: Apply the percentages to each category

After you’ve done all of the calculations, it’s just a matter of sticking to your new budget. You can do this a number of ways, but setting up automatic payments through bill pay and scheduling savings transfers can be very effective.

Depending on the financial goals you’re trying to reach, there are a variety of ways to ensure you achieve it.

  1. For a savings goal, open a separate account to deposit 30% into your savings category.
  2. For investing into retirement accounts open a 401(k) or IRA. For a 401(k) through your employer, set up a direct deposit into the account. However, don’t take out 30%, because this would be pre-taxed. Instead, figure out what percentage of your gross income would equal 30% of your take home pay. Using the example above, if your gross paycheck is $10,000, you’ll want to request 22.5%, which would deposit about $2,250 into your 401(k). If you open an IRA, you can make contributions either pre- or post-tax.
  3. To pay off debt, make a payment equal to 30% of your income every time a deposit goes into your account.
  4. If you have multiple budgeting goals – like, saving for a down payment, increasing your retirement fund and paying off your credit card debt, then simply divide the 30% between all of them.
  5. Use 30% of your after-tax income to pay your monthly bills. You might find that 30% doesn’t stretch very far, so consider finding ways to decrease your basic expenses. For example, you could lower your insurance premiums with a higher deductible, or decrease your mortgage payment by refinancing with a lower rate.
  6. The 10% that’s left is for you to spend at your discretion – so choose wisely!

Once you’ve set up your percentage structure and budget allocations, it’s just a matter of committing to your financial plan!

Why should I use 30% of my paycheck for savings or debt?

Developing the money habit of saving allows you to enjoy a great degree of financial independence.

With a little extra money in the bank:

  • You can meet unexpected expenses without relying on debt.
  • You experience less stress just knowing you’re financially prepared for emergencies.
  • You have the freedom to cover costs that enrich your life, like going on a vacation, getting a new car, etc.

Also, getting out of lots of debt and building a nice financial cushion are both critical steps to reaching financial independence before you retire. Applying 30% of your household income would be a great way to reach those goals faster, especially if you’re behind with your retirement goals.

However, saving close to a third of your disposable income might seem very ambitious. However, if you’re serious about achieving your financial objectives, you can reach them faster with this budgeting method.

Here are a few reasons it’s smart to set aside 30% of your income for savings:

  • Pay off your mounting credit card bills
  • Build a 6-month emergency fund
  • Catch up on your retirement savings
  • Start your own business
  • Invest in real estate for passive income
  • Open a college savings fund for your teenager’s college education

How you can make the 30-30-30-10 budget method work for your finances

The 30-30-30-10 budgeting strategy emphasizes savings and debt payoff goals. If these two objectives are financial priorities for you, then you can make this budget work with your finances.

The first step is determining if 30% of your income will effectively cover your basic expenses. For many people, the housing category alone eats up 30% of their paychecks. This is when you need to get a little creative with lowering your bills.

One option to significantly decrease your housing expenses is to refinance your mortgage rate. Getting the lowest mortgage rate possible could potentially lower your monthly bill by a couple hundred dollars. If you’re a renter, you may have to move to a less expensive area where rent fees are cheaper.

You’ll also need to be content with less fun money in your budget. This could look like having more home-cooked meals instead of dining out, or shopping at thrift stores instead of Target for a new outfit.

The bottom line is that the 30-30-30-10 budget may require a serious financial shift on your part. You’ll need to decide if your financial goals are worth making these sacrifices for.

Can you realistically follow the 30-30-30-10 rule for money?

Having a maxed out retirement fund and being debt-free are some pretty awesome money goals. 

But, not everyone can use this budget method with their finances. For someone living paycheck to paycheck, this budget strategy may not be possible.

With the 30-30-30-10 budget, you’ll need to make enough money that allows you to effectively live off 70% of your net income.

Before you decide you can’t, take a closer look at your spending habits. If you spend a lot on unnecessary expenses, you may be able to lower those costs and start saving more.

Track your spending for 30 days to find the money leaks. This will give you a better idea if the 30-30-30-10 budget is realistic for you.

Even if you discover that this budget method wouldn’t work for you right now, you could try to increase your income. Maybe you only need a couple hundred dollars extra a month to make it work for you. You could easily make up for this shortage by getting a part-time job or weekend side hustle.

You could also make adjustments to this budgeting method to make it more suitable for your financial circumstances. Consider changing the percentages so they are easier for you to apply. For example, maybe a 30-30-20-20 budget would work better for you.

Don’t give up on your financial goals just because you don’t have the means right now to achieve them. Be proactive to make more money and lower your bills – even if just temporarily – so you can reach your savings goals faster.

Use the 30-30-30-10 Budget Calculator

Wondering what these percentages would be for your own finances?

Plug in your estimated total monthly net income, and this 30-30-30-10 budget calculator will tell you.

Use the 30-30-30-10 budget template

So, are you ready to put the 30-30-30-10 budget in action?

If so, download this free budget worksheet and start saving more today!

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Other methods for budgeting by percentages

If the 30-30-30-10 budget rule doesn’t quite fit your current financial circumstances, try a different budget method based on other percentages.

Here are six common budgeting methods to choose from:

70-20-10 rule budget

The 70-20-10 rule budget method uses an income allocation that applies the majority of your take-home income for expenses instead of savings:

  • 70% for all expenses, both necessary and discretionary
  • 20% for savings or debt repayment
  • 10% for investment goals or charitable giving

This can be a successful budget for those who have higher living costs and lower debt.

60-30-10 budgeting rule

This percentage-based budget method focuses heavily on savings and debt payoff, and can help you reach your budget goals faster than other spending plans.

The 60-30-10 rule method of budgeting allocates over half of your net income to go into your financial goals bucket:

  • 60% for savings and debt payoff or other goals
  • 30% of income on housing and all necessary expenses, such as a monthly mortgage payment, food, and health insurance
  • 10% of income on fun and discretionary spending

This budget technique is for those who can keep the majority of their living expenses under 30% of net income, and are willing to limit discretionary spending to 10%.

60-20-20 monthly budget method

Here is another method to budget by percentages that could help you manage your finances better and help you reach your goals.

The 60-20-20 monthly budget allocation dedicates the majority of your net income to your necessary living expenses:

  • 60% for necessary costs, like housing and food budget
  • 20% for financial goals, like building an emergency fund or investing for retirement
  • 20% for all discretionary spending

If the housing category in your budget takes up a significant portion of your income, or you have a large family to support, this method could be a good option for you.

50-30-20 budget

The 50-30-20 budget rule was created by Senator Elizabeth Warren. This popular budgeting method keeps your essential expenses down to half of your total net income:

  • 50% for needs
  • 30% for wants
  • 20% for savings and debt reduction

Again, another good option that allows more for daily living expenses and a smaller percentage to save for a healthy cash buffer.

60/40 budget plan

The 60-40 budget method is another budgeting option that only assigns two categories to your spending plan:

  • 60% for all necessary expenses
  • 40% for everything else

Could it be any simpler? If you appreciate a less restrictive spending plan for your financial life, the 60-40 budget plan might be the method you want to try.

80-20 budgeting method

The 80-20 budget method only has two categories for your net income:

  • 80% for the expense category
  • 20% for the savings category

This is a very effective but simple approach that is easy to implement. All you have to do is set aside 20% of your net income into a separate savings account, and then live on whatever is left.

Conclusion: find the budget strategy that works for you

If you feel overwhelmed with all of the spending decisions that are necessary for your personal finances, you may want to try a budgeting strategy based on percentages. These methods can make traditional budgeting for household expenses, debt repayment, and savings goals easier to achieve.

There are many budgeting techniques you could apply to your personal finances to improve your financial health. Whatever you do, don’t let any confusion you have about the concept of budgeting deter you from using one with your own finances.

Budgeting is the best way to reach your long-term savings goals, carry out your debt payoff plans, and save for the retirement you dream about.

You can use pen and paper, a spreadsheet on your computer, or even a budgeting app to simplify your efforts.

For further budgeting advice, read my post on 33 budgeting tips for beginners. There are also many good budgeting books out there – check out your local library or Amazon.com.

The important thing is to use some type of budget tracker that helps you stay on track with your day-to-day budget and focused on your financial objectives. Choose one of the budgeting strategies outlined in this post, and start being more intentional with your money goals today!

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The 30-30-30-10 Budget: 5 Steps To Save More Money

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