Let's be honest—most of us don't fail at saving money because we don't earn enough. We fail because we don't have a clear plan. Money comes in, expenses go out, and somehow the month ends before the savings begin.
That's exactly where the 70/20/10 rule of money comes in. It's simple, practical, and realistic enough to follow in everyday life—especially if you don't want to track every single rupee you spend.
What Is the 70/20/10 Rule, Really?
The rule suggests dividing your monthly income (after tax) into three clear parts:
70%
for spending
20%
for saving and investing
10%
for debt repayment or giving
No complicated formulas. No financial jargon. Just a structure that helps you stay in control.
70% – Your Daily Life Happens Here
This is the money you actually live on.
Rent, groceries, electricity bills, petrol, phone recharge, Netflix, eating out—everything fits here. The idea isn't to cut all fun, but to make sure your lifestyle doesn't quietly eat up your future.
If your income increases, this 70% increases too—but your expenses should still stay within limits.
Quick Reality Check:
If your spending regularly crosses 70%, it's usually a sign that either lifestyle inflation has kicked in or expenses need trimming.
20% – Where Your Future Is Built
This is the most powerful part of the rule.
That 20% is meant for building your financial future and security.
What Goes Into Your 20%:
Emergency Fund
3-6 months of expenses for unexpected situations
Fixed Deposits
Safe, guaranteed returns for short-term goals
Mutual Funds
Long-term wealth creation through market investments
Retirement Savings
Building corpus for your golden years
Even if the amount feels small today, consistency matters more than size. Over time, this habit compounds—not just money, but financial confidence.
Pro Tip: If you're planning withdrawals from investments or want to understand how long your savings will last, tools like an SWP calculator can help you make smarter, stress-free decisions without guesswork.
10% – Clearing Debt or Giving Back
This portion is often ignored, but it plays a big role mentally.
You can use it to:
Paying extra toward debt—even a little—can significantly reduce interest over time. And if you're debt-free, using this money for giving often brings more satisfaction than extra spending.
Why This Rule Actually Works in Real Life
Unlike strict budgeting methods, the 70/20/10 rule:
The Key to Success:
You don't need to be perfect. You just need to be consistent.
Some months won't go as planned—and that's okay. What matters is getting back on track.
Can You Modify the Rule? Absolutely
This isn't a law. It's a guideline.
If you're aggressively paying off debt:
Consider 60/30/10 (more towards debt repayment)
If you're early in your career:
Maybe 75/15/10 (higher living expenses, building emergency fund first)
If you're a high earner:
Consider 60/30/10 (more aggressive savings and investments)
The structure stays the same; the percentages can move based on your life situation.
Practical Example: ₹50,000 Monthly Income
After-tax monthly income: ₹50,000
70% = ₹35,000
Rent (₹15,000) + Groceries (₹8,000) + Utilities (₹3,000) + Transport (₹4,000) + Entertainment (₹5,000)
20% = ₹10,000
Emergency Fund (₹4,000) + Mutual Funds (₹4,000) + Fixed Deposit (₹2,000)
10% = ₹5,000
Extra loan payment (₹3,000) + Charity/Giving (₹2,000)
Frequently Asked Questions (FAQ)
1. What is the 70/20/10 rule of money?
The 70/20/10 rule is a simple budgeting strategy where you divide your after-tax income into three parts: 70% for daily expenses and lifestyle, 20% for savings and investments, and 10% for debt repayment or giving back.
2. Can I modify the 70/20/10 percentages?
Yes, the rule is flexible. You can adjust percentages based on your situation - for example, 60/30/10 if paying off debt aggressively, or 75/15/10 if you're early in your career with lower income.
3. How do I calculate 70/20/10 from my salary?
Use your after-tax income. For example, if you earn ₹50,000 monthly after taxes: 70% (₹35,000) for expenses, 20% (₹10,000) for savings/investments, 10% (₹5,000) for debt repayment or giving.
4. What should I include in the 70% spending category?
The 70% covers all daily living expenses: rent, groceries, utilities, transportation, phone bills, entertainment, dining out, and other lifestyle expenses. It's your complete living budget.
5. Is the 70/20/10 rule better than other budgeting methods?
The 70/20/10 rule is simpler than detailed budgeting methods like zero-based budgeting. It's ideal for beginners or those who want structure without micromanaging every expense. Choose the method that you can consistently follow.
Final Thoughts
The biggest benefit of the 70/20/10 rule isn't just better money management—it's peace of mind.
You know:
- • Your expenses are under control
- • Your future is being funded
- • Your money has a purpose
And once that clarity comes in, money stops feeling stressful and starts feeling empowering.
Ready to Plan Your Financial Future?
Now that you understand the 70/20/10 rule, use our SWP calculator to plan how your 20% savings can generate regular income in the future through systematic withdrawal plans.
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