Jean Chatzky
Do one thing: If you don’t use a budget to manage your finances, there’s no time like the present. And if the 75/15/10 budget explained below doesn’t seem like it is for you, go online to explore other budget options to best meet your needs.
What’s the 75/15/10 Budget Rule?
There has been a lot of talk on TikTok and other social media platforms recently about the 75/15/10 budgeting rule that some say is used by the super-rich. As in, this is how some billionaires handle their money, so maybe you should be interested in seeing how this works, too.
Simply put, the 75/15/10 rule is a budgeting framework where you divide your monthly earnings into three spending and savings categories:
- 75% goes to living expenses
- 15% is directed to retirement savings
- 10% goes to short-term savings and/or debt repayment
What’s Good About This Plan?
Certified financial planner Nick George, owner of ClearMind Capital, says this budget guide “can create structure for people who need a clear plan, especially early in their financial journey.” But as we all know, personal finance is personal, so not everyone (or their earning and spending needs) may fit neatly into this format.
“And that’s okay,” George explains, adding that “the one constant is trying to save 20 to 25% of your gross income in the right places.”
When to Reallocate. In other words, some people may have already built strong short-term reserves and paid off debts, so they may not need to set aside 10% of their after-tax income to create a cash cushion and direct it to debt repayment. “That could (instead) be redirected to mid-term goals like buying a second home, funding a sabbatical, or starting a side business,” George says. “One of the most important things I coach clients on is saving up front, not from what’s left over. When we automate savings before expenses hit, we tend to see much better success.”
Why You Should Save First
Think about how easy it is to fund a 401(k) account when an employer deducts a specific amount from your paycheck and you never see the money. Because out of sight is usually out of mind, most people don’t notice the amount that is deducted, and they can adapt and live without that portion of their pay for the time being. But if we try to spend and then save, notes George, one unexpected expense can derail your whole budget. When that happens, he says, people often abandon the plan and think, “I’ll try again next year.”
Automatic Savings. “But by saving first and automating (or mapping) it into clearly defined buckets, short-term, mid-term, and long-term, we create a system that’s resilient, not rigid,” he explains. “It’s not about following a rule perfectly but rather trying to build a sustainable habit.”
Who Benefits Most From the 75/15/10 Budgeting Rule?
Daniel E. Milks, CFP, founder of Fiduciary Organization & Woodmark Advisors, describes the 75/15/10 budgeting rule as a helpful starting point but rarely a perfect fit. In general, this spending plan could be doable for someone who wants to pay off high-interest debt and is motivated to fund life after work.
“I use it as a framework, then tailor it based on goals,” Milks says, “especially if someone’s focused on debt payoff or early retirement.”
Building a Workable Budget
The key to making sure that any budget or spending plan will work and is sustainable is to:
- First, get a firm handle on exactly where your money is going.
- Set aside some time to go through your monthly expenses to find out how much you spend in the categories of needs and wants.
- Needs include a mortgage or rent, utilities, and transportation, plus groceries and insurance premiums.
- Wants include entertainment such as streaming services, plus things such as restaurant food, concert tickets, beauty products, etc.
Of course, in the 75/15/10 plan, the needs and wants are lumped together, so if you had to cut from that category, trimming the “wants” would be a wise place to start. How can you do that?
Mind Your Food Costs
We know that as a group, Americans spend a ton on eating out. Food was the third-largest spending category for U.S. residents in 2023, behind shelter and transportation, according to data from the Bureau of Labor Statistics. And thanks to inflation, the price of groceries rose more than 8% in 2024 alone. Which means watching what you spend on what you eat has never been more important.
To trim food costs, you can:
- Eat more meals at home
- Bring your lunch to work
- Prep meals ahead of time
- Learn to love leftovers
- Shop from your pantry and freezer first
And remember, when you go to the grocery store, always bring a list, stick to the items on sale whenever possible, and don’t shop (for anything) when you are hungry or thirsty.
With reporting by Casandra Andrews
Chris O'Shea
