The 70-20-10 Rule

When it comes to budgeting and using a percentage structure for certain categories related to personal finance, it's important to have a clear understanding of your income and expenses. Here are some steps that you can follow to create a budget using a percentage structure:

1. Determine your monthly take-home income: this is the amount of money you receive after taxes and other deductions are taken out of your paycheck

2. List your fixed expenses: these are expenses that do not vary from month to month, such as your house payment, car payments, and other loan payments

3. List your variable expenses: these are expenses that can vary from month to month, such as groceries, utilities, and entertainment

4. Determine the percentage of your income that should be allocated towards each category, and using the 70-20-10 rule, you could allocate your income as follows:

   • 70% towards essential expenses (including your fixed expenses)

   • 20% towards financial priorities (such as paying off debt and saving for emergencies)

   • 10% towards giving

5. Calculate the dollar amount for each category: once you have determined the percentage of your income that should be allocated towards each category, you can calculate the dollar amount for each category based on your monthly take-home income

6. Review and adjust your budget as needed: once you have created your budget, it's important to review it regularly and adjust it as needed based on changes in your income or expenses

Here's an example budget based on the above steps. Assuming that your monthly take-home pay is $4,000.00, you can allocate specific dollar amounts following the 70-20-10 rule as follows:

• The 70%: essential expenses (including fixed expenses)

• House payment: $900

• Utilities: $200

• Other expenses, including groceries: $900

• Credit cards, car loans, other debt regular payments: $800

• The 20%: growing savings or paying off debt will equate to $800.00 (if all or part of this amount is not used for savings, it will then be used in addition to regular payments to accelerate debt payoff)

• The 10%: charitable giving will be $400.00

The key to successfully using a percentage structure for your budget is to be disciplined and stick to your plan. By prioritizing your essential expenses, financial priorities, and charitable giving in a structured way, you can work on achieving your financial goals and keep yourself within certain percentage boundaries. This will help you to not overspend in any one area.