The 10 10 10 70 method is a straightforward financial guideline for managing your income, designed to encourage saving, sharing, and investing alongside spending. It emphasizes the importance of "paying yourself first."
Understanding the 10 10 10 70 Rule
The core principle is dividing each dollar you earn or receive into four categories:
| Category | Percentage | Purpose |
|---|---|---|
| Save | 10% | For emergencies, large purchases, or future goals. |
| Share | 10% | To give to charity, help others, or support causes you care about. |
| Invest | 10% | To grow your money over time through stocks, bonds, or other assets. |
| Spend | 70% | For daily living expenses, wants, and discretionary spending. |
Key Concept: Paying Yourself First
This rule highlights the crucial aspect of allocating 30% of your earnings first to yourself—for your future security and for sharing, before anything else. This proactive approach ensures that saving, investing, and sharing are prioritized over impulsive spending.
Practical Insights:
- Adaptable: You can adjust the percentages based on your financial goals and lifestyle, but the fundamental concept of dividing your income remains relevant.
- Budgeting Tool: It serves as a simplified budgeting method that promotes a balanced approach to money management.
- Financial Awareness: It cultivates awareness of where your money is going and helps you make informed spending decisions.
Examples:
- If you earn $1,000, using the 10 10 10 70 method, you'd allocate:
- $100 to saving.
- $100 to sharing.
- $100 to investing.
- $700 to spending.
- This method encourages you to set aside the crucial savings and investment portions before you consider spending money.
Solutions:
- Automate: Set up automatic transfers to your savings, investment, and giving accounts each pay period.
- Track Spending: Keep track of your expenses to ensure you're staying within the 70% spending limit.
- Review and Adjust: Regularly review your financial situation and make necessary adjustments to your percentages.
In conclusion, the 10 10 10 70 method is a simple, yet effective, framework for managing your money. It focuses on making sure you save, share, and invest portions of your income before spending, thus promoting long term financial wellbeing.
