70 20 10 Rule – A Straightforward Way to Manage Your Money

Ever feel like your paycheck disappears before the month ends? The 70‑20‑10 rule gives you a clear map for every pound that comes in. Instead of guessing where your cash goes, you allocate it into three buckets: 70% for living costs, 20% for savings or investments, and 10% for debt repayment or extra expenses. It’s simple enough to set up in a day and powerful enough to change your financial habits.

What the 70‑20‑10 Rule Means

First, figure out your total net income – that’s what you actually take home after tax and deductions. Then split it:

• 70% – Essentials: rent or mortgage, utilities, groceries, transport, and any other recurring bills. Keep this bucket realistic; if you’re consistently over, look for ways to trim.
• 20% – Savings & Investments: this isn’t just a rainy‑day stash. Think of a high‑interest savings account, a stocks‑and‑shares ISA, or a pension contribution. The goal is to grow your money while you’re living.
• 10% – Debt or Buffer: use this slice to pay down credit cards, personal loans, or a student loan. If you have no debt, treat it as a buffer for unexpected costs or a fun “treat yourself” fund.

The rule works for anyone with a regular income – from a junior accountant to a small‑business owner. It’s flexible, too. If your rent is unusually high, you might shift a few percent from savings to essentials, but try to keep the overall balance close to the 70‑20‑10 split.

How to Apply It Today

Step 1: List your monthly net income. Pull your latest payslip or bank statement and write down the exact number.

Step 2: Calculate each bucket. Multiply your income by 0.70, 0.20, and 0.10. For example, with £3,000 net pay you’d have £2,100 for essentials, £600 for savings, and £300 for debt.

Step 3: Track your spending. Use a budgeting app or a simple spreadsheet. Mark every expense and see if it fits the bucket you assigned.

Step 4: Adjust as needed. After a month, you’ll spot patterns – maybe you’re spending £2,300 on essentials. In that case, cut back on discretionary items or find a cheaper utility plan to bring it back to the 70% target.

Step 5: Automate the good habits. Set up automatic transfers: one to your current‑account for the 70%, another to a savings account for the 20%, and a third to your loan provider for the 10%. Automation removes the temptation to skip a payment.

Step 6: Review quarterly. Life changes – a raise, a new mortgage, or a side gig. Re‑run the calculations and keep the percentages in line with your new reality.

When you first start, you might feel a pinch, especially if you’ve been living paycheck‑to‑paycheck. That’s normal. The 70‑20‑10 rule isn’t about depriving yourself; it’s about making every pound work for a purpose. Over time, you’ll notice more cash left over, less stress about debt, and a growing nest egg that feels within reach.

Want a quick comparison? The popular 50‑30‑20 rule splits income into needs, wants, and savings. The 70‑20‑10 flips that idea for people who have higher living costs or want to focus more aggressively on debt reduction. Both are valid – choose the one that matches your situation.

Bottom line: grab a pen, calculate those three numbers, and let the 70‑20‑10 rule guide your next paycheck. Your future self will thank you.