60 30 10 Rule Budget. As humans, there is a need to plan our incomes and expenses. A budget is an estimation of future expenses and revenues for a certain period of time. It can be made for an individual, business, project, government, or other organization.
The 60 30 10 rule budget is an ideal budget rule suitable for ambitious savers. The numbers each are representative of a percentage of your budget.
⦁ Using this budget rule, 60% of your earnings is utilized to build your savings, pay off debt or invest.
⦁ In addition, 30% of your take-home pay will be spent on your basic needs which include food, housing, healthcare, and many more.
⦁ Lastly, the remaining 10% is used to pay for discretionary spending or personal needs. These might include going to the cinema, getting a new gadget, and many more.
The 60 30 10 rule budgeting style is ideal for ambitious savers, those that have big financial goals. Someone owing debt can also adopt this method as 60% of his income is utilized in that respect.
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Advantages Of 60 30 10 Rule Budget
1. Faster progress toward financial goals
The most noticeable advantage of the 60 30 10 rule budget is that you will speed up your time frame for any financial goal. Whether your financial goal is to pay a debt, build emergency savings, or other stuff, this budgeting style is perfect for you.
2. Disciplined in spending on what is of utmost importance
The 60 30 10 rule budget would help in being disciplined to spend only on those things that really matter to you.
3. Urge to boost your income in creative ways
If you want to boost your discretionary spending, there is a need to build your income and this can be through side hustles.
One of the cons of the 60 30 10 is limited discretionary spending options as many of your wants are left unsatisfied. So, this method is not suitable for those that prefer a luxurious lifestyle as they are limited to what they can buy. Also, some of your personal needs might be cut to make sure it is still within 30% of the budget rule.
Therefore, listed below are the steps to take in setting up a 60 30 10 rule budget
⦁ Know your take-home pay
Your income, salary earned, or take-home pay is the starting point for the 60 30 10 rule budget. Hence, the amount you earn in an organization or as a businessman should be determined. However, this is more difficult for an individual business owner or a contractor as the income is not fixed but varies. The determination of your take-home or earned allowances forms the basis of the 60 30 10 rule budget.
⦁ Give attention to your financial goals first
After determining your take-home pay or earned allowance, the next step to follow is to assign or allocate 60% of your earnings to your financial goals. Your financial goal might be to start investing, build emergency funds, pay off debt, and many more. These goals vary between individuals and are peculiar to their current financial situation.
It is however pertinent to take some time to choose your financial goals that correspond with your future before you dive into any course of action. For instance, you may want to pay off debt which is a fantastic financial goal, or it can be for the purpose of personal investment which is also a nice idea. It is compulsory to take into account what your long-term financial goals are and to ensure you make investments that will be suitable for you.
⦁ Plan for your needs
This is the third step and here, you will utilize 30% of your earned allowance or take home to sort for your needs. These needs include; housing, food, healthcare, transportation, and others which are the basic need of life. In our day-to-day activities, we cannot do without using them. You have to adjust your lifestyle so that your needs do not exceed 30% of your take-home. For instance, you can choose not to go to the cinema often, avoid shopping for things unnecessarily, continue driving an old car, and many more. All these take discipline and the 60 30 10 rule budget is designed for ambitious and disciplined individuals.
⦁ The last 10% should be spent on the things you want
This is the last step in the 60 30 10 rule budgeting style. The remaining 10% should be spent on the things you personally desire such as a new gadget, going to the cinema, visiting a zoo, going to a spa, going on a dinner date, and countless other things you want. However, all these personal needs as beautiful and fantastic as they look should not exceed 10% of your earned allowance or take home. It is pertinent to treat yourself to the things that matter to you in order to avoid letting the whole budgeting plan fail.
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The 60 30 10 rule budget is a nice choice for people that are frustrated and tired of their financial condition and wants to improve it. The budgeting style may look difficult at first for people with low income but discipline and consistency would play an important role in the long run.
This budgeting style is therefore possible for everybody irrespective of your class. Individuals may, however, try to increase their income and one way to do this is by having a side hustle or cutting costs on big-ticket items such as food and housing. The presence of a side hustle helps to create an additional income stream in addition to your take-home or earned allowances. The main thing to ensure is to pay yourself first, which helps ensure you save money before spending it.
This budget rule can help to transform individual finances significantly by helping you to accelerate your progress towards your financial goals. You can also be required to boost your income by starting a side hustle or other things all with the aim of making this budgeting style a relatively comfortable one.