What Is The 30/30/30/10 Rule Budget? (With Examples)

Man looking at a budgeting app on his smartphone

Saving money is always good, but starting a budget is not always easy. It can be overwhelming for many people since it involves facing your financial situation. So why not try the 30/30/30/10 rule budget?

If you are one of those who feel that you keep spending money on unnecessary things, this is a great way to start cutting them and saving some money. Of course, you can also try the extreme budget, but only if you are looking for a fast way to cut those expenses.

Before you start with the 30/30/30/10 budget, let's explore what it consists of, if you should try it, and see examples to understand it better. You can also check the 80/20 rule budget if you are new to budgeting since it's less complicated.

What Is The 30/30/30/10 Rule Budget?

Like any budget method, the 30/30/30/10 is based on percentages and focuses on four different categories:

30 30 30 10 rule budget
  • Housing – You will spend 30% on house expenses like rent, mortgage, property taxes, and maintenance costs.
  • Needs – You will spend 30% on basic necessities like bills, groceries, and transportation.
  • Goals – You will save 30% of your salary to build your savings, pay off debt or invest the money.
  • Wants – You will spend 10% of your budget to pay for things you want that are considered non-essential expenses, like Netflix or gym membership.

So, you will have 30% of your salary to spend on housing stuff, which includes rent or mortgage, and anything that involves the house, like property taxes or maintenance costs. Another 30% will be spent on your needs like bills, transportation, and groceries. Then, you will save 30% for a financial goal you have in mind, pay a debt or invest in something. Finally, 10% of your income will go to fun stuff you want to do, but that isn't a priority to survive.

Who Is The 30/30/30/10 Rule Budget Ideal For?

The 30/30/30/10 rule budget method is ideal for anyone who wants to prioritize savings and if you like to split your rent/mortgage from the rest of your essential bills (I know some people prefer this way). This budget technique is also straightforward and ideal for new budgeters.

If your wages barely pay the bills, it's not easy to prioritize your savings. But if you pay close attention to your spending, you may find enough money to achieve the required 30% of your goals. This budgeting method is ideal if you want to regain control over your finances. You can also check the 60-30-10 rule budget if you want to save most of your income.

The 30/30/30/10 rule budget is excellent for you if you:

  • Want to prioritize your financial goals.
  • Have financial goals that need considerable money.
  • Desire to save a big chunk of your salary to invest in something else.
  • Want a budget where you split your housing expenses from the needs category.
  • Wish to create an emergency fund to ensure you can live months without income.
  • Cut unnecessary expenses

How To Budget Your Money With The 30/30/30/10 Rule Budget?

Now that you have an idea of what the 30/30/30/10 budgeting method consists of and if it’s ideal for you or not, let me explain more in-depth all four categories.

30 30 30 10 budgeting

Spend 30% Of Your Money On Housing

30% of your salary will be allocated to the housing category, which englobes all the costs associated with the house. However, this category doesn't include any bills, but only literally housing stuff.

A few examples of what is considered to be part of the needs category:

  • Rent
  • Mortgage
  • Maintenance costs
  • Property taxes

If your salary is $2,000 after-tax, that means you would allocate $600 to your housing category each month. In 12 months, you would have spent $7,200.

Spend 30% Of Your Money On Needs

Another 30% of your earnings will be allocated to the needs category, which englobes all the costs you can't avoid or would be difficult to live without. Again, it's crucial to be accurate because you can live without an entertainment subscription (that's on the wants category), but not without paying the water bill. So focus on the basic needs in this section of your budget.

A few examples of what is considered to be part of the needs category:

  • Utility Bills (Water, Gas, Electricity)
  • Groceries
  • Insurances
  • Transportation
  • Any Loans
  • Household Products
  • Medications

If your salary is $2,000 after-tax, that means you would allocate $600 to your housing category each month. In 12 months, you would have spent $7,200.

Spend 30% Of Your Money On Goals

The last bit of 30% of your income will be allocated to the goals category. This category is all about your financial goals, and that doesn't need to be only regarding you saving money to purchase something. You can have many different financial goals, and having more than one is essential.

A few examples of what is considered to be part of the goals category:

  • Buying a House
  • Emergency Fund
  • Debt Payments
  • Real Estate Investments
  • Starting a Business
  • College Savings For Kids
  • Retirement Contributions
  • Stock Investments
  • Sinking Funds

If your salary is $2,000 after-tax, that means you would allocate $600 to your housing category each month. In 12 months, you would have spent $7,200.

Spend 10& Of Your Money On Wants

Finally, the last 10% of your income will be allocated to the wants category, which it's everything that is not essential, but you have joy consuming.

A few examples of what is supposed to be part of the wants category:

  • Holidays
  • Entertainment Subscriptions
  • Travel
  • Shopping
  • Dates
  • Dining Out
  • Memberships (gyms, professional organizations)
  • Hobbies

If your salary is $2,000 after-tax, that means you would allocate $200 to your wants each month. In 12 months, you would have spent $2,400.

How Do You Set Up The 30/30/30/10 Rule Budget?

If you decide you want to move forward with a 30/30/30/10 rule budget, here's how you can set one up.

How Do You Set Up The 30 30 30 10 Rule Budget

1 – Calculate Your After-tax Income

So, you first want to calculate your after-tax income and understand how much money you will receive every month. Some people receive the same amount every month, but for others, it can vary, which makes budgeting a lot more complicated (but not impossible). If you are a freelancer, estimate how much money you expect for the next month. Some people get paid weekly and some biweekly, so you must adjust your budget according to your situation.

You can use the free tool on the IRS website to help determine how much income you can expect to receive and how much taxes you will pay. However, if you have any questions, it would be better to speak with a tax professional.

2 – Use The 30/30/30/10 Template/Spreadsheet

To keep you organized and have a more reasonable perspective of what you need to do, ensure you use the 30/30/30/10 template. It can be a spreadsheet you print and use/fill online or an Excel sheet. Whatever makes your life easier, it's what you should use. Don't forget your partner's income and expenses, and check the best personal budget categories for you.

I love Excel sheets, but some people like to have a printed spreadsheet where you can quickly look at all your expenses and how much cash you have allocated to each category. Learn how to make a budget in Excel.

3 – Categorize Your Spending From Last Month

Now you need to split all your income between the four categories of housing, needs, goals, and wants. Again, try to be the most specific possible to have a clearer idea of your expenses. Check your bank statement from the last month, and you will be fine.

Start with your housing expenses (30% of the budget), and add your rent/mortgage and anything housing related (not the bills). Then add your needs (another 30%), including anything you can't avoid or would be difficult to live without. Then, add the last 30% of your salary to your goals, like paying debt, saving money for a car, etc. At last, add the 10% of wants because you need to have fun or you will not stick with a budget for too long.

You should also know how much money you allocate to each category from your income. Again, you can find out by doing these maths (you can check the examples section to understand better how to do it).

30%= Income x 0.30 = amount for your housing
30%= Income x 0.30 = amount you will needs
30%= Income x 0.30 = amount you will goals
10%= Income x 0.10 = amount for your wants

4 – Set Up Your Financial Goals

Once you determine how much income you will receive, how much is allocated to each category, and all your expenses are organized, you need to set financial goals.

In my opinion, budgeting is not worth it if you don't have the motivation to achieve your monthly goal. You need to set financial goals for each month or even an entire year or five. I gave you some ideas above of what your objectives could be. Some examples are buying a house, paying an immense debt, or creating an emergency fund. You also need to know why you want to invest your money.

You may not have set financial goals initially because you didn't know your income and expenses. Now you can set realistic financial goals because you know your monetary situation.

5 – Evaluate And Adjust Your Spending

Finally, you must evaluate and adjust your personal budget or family budget at two different moments. First, check your spreadsheet and see if you need to adjust anything to meet each category's percentage levels so you don't overspend. The second time you need to evaluate it's at the end of each month, see what went right and wrong, and adjust some more.

Every month you will need to evaluate and adjust your budget. Don't get discouraged if you fail or it doesn't go like you wanted because you will not get everything perfect on the first attempt. Even the more experienced budgeters like me still make mistakes after years of budgeting. You may need to try a different budgeting method.

30/30/30/10 Rule Budget Examples

The average American earns approximately $51,480 gross per year in the USA, equivalent to $4,290 monthly. So that’s the value I will use in my example.

Note: For your information, I have researched a lot about how much the average American pays for rent, bills, groceries, etc. However, remember spending varies significantly across each state. These examples are just for you to understand better how the 30/30/30/10 rule budget works.

The first example is for a single person who splits a house with someone that is not their partner and has no kids.

30 30 30 10 rule budget example

The easiest way to divide up your budget is to split it into percentage-based portions for each category. (The more precise you can be the better.) For example, “holidays in Italy” is an obvious example and you know exactly where you spend your money.

Focus on your housing and needs first, and then adapt the goals and wants to your necessities if you need to borrow money from the other two categories. However, try to be the most accurate you can. In the example, you have three different goals, but you can focus only on one at the beginning to make it easier.

30 30 30 10 rule budget example for couples

If you’re budgeting your money and your partner’s salary, you can check the 30/30/30/10 rule budget example for two incomes. Remember to merge the two wages and use that amount to budget your money for the month.

Budgeting money with someone else, when you have children, can be a massive challenge because that means keeping the entire family on the same financial page, which often doesn’t happen. You may have to cut some expenses to ensure you can split your money into four different categories.

Is The 30/30/30/10 Rule Budget Good For You?

If you are looking for a budget that prioritizes your savings and splits your housing costs from your needs, allowing you to use most of your salary for both, the 30/30/30/10 rule budget is the one for you.

My final word of advice is to focus on the housing and needs category first and adapt the percentages to the wants and goals categories. Then, after the first few attempts, you start adjusting the percentages back to 30/30/30/10. But remember, having a budget without financial goals and spending money on things you consider fun is part of a successful budget. Otherwise, what is the point?

Author: Michael Dinich

Title: Journalist

Expertise: Side Hustles, Passive Income, Investing

Bio:

Michael Dinich is a journalist, personal finance expert, and a true geek at heart. Michael founded Wealth of Geeks in 2017, and he's the executive producer of the Wealth of Geeks podcast. He's known for his relatable financial advice and passionate discussions about all things geek.