The 70/20/10 rule: how the 70 20 10 budget works

What the 70/20/10 rule says

Chase describes the 70/20/10 budget as three parts of net income, which is the money left after tax:

• About 70% for spending. Fixed costs like rent and utilities, variable costs like groceries, and the minimum payments on any debt.
• About 20% for saving. An emergency fund, a down payment, retirement.
• About 10% for extra debt or giving. Payments above the minimum on student loans or medical bills, or donations.

The 70% is one big pile. Rent and a night out come out of the same number, so the rule does not tell you how much of it is must-have. Chase says as much: the rule may lack nuance, and some people overspend because essential and optional purchases share one category.

Where the 70 20 10 rule comes from

Nobody we could find. The Chase page we read does not credit an author or a year, and it gives no dollar example. So this is a rule of thumb that banks and money sites repeat, not a plan with a named author you can read. If you want a published plan with a source, Fidelity's and Ramit Sethi's are on the budget rules overview.

A worked example on $5,000 a month

Say $5,000 lands in your account each month after tax. Multiply by each share:

If rent, utilities, groceries, the car, fun and minimum debt payments come to $3,500 or less, you are inside the rule. If they come to $4,000, you are $500 over, and the rule says that is where the squeeze shows up in saving or giving.

70/20/10 calculator

Type your take-home pay. Add a partner's to see each person's amounts and the household's.

The 70/20/10 rule for a couple with two incomes

The rule works on any pay, so you have two ways to use it. Each of you applies it to your own take-home. Or you add both pays and treat the household as one. With $5,200 and $3,400 of take-home, the two pays make $8,600, and 70% of that is $6,020 for spending, $1,720 for saving and $860 for extra debt or giving.

What the rule leaves open is who pays the shared bills. Our guide on splitting bills by income works through it. On $3,000 of shared bills, 50/50 is $1,500 each, which is about 29% of the $5,200 pay and 44% of the $3,400 pay. Splitting by income is about $1,814 and $1,186, 60% and 40%, which takes the same share from each pay. Under 70/20/10, the second way leaves each person with the same room for the rest of their 70%.

When the 70/20/10 budget doesn't fit

• High rent. If housing and other basics already take more than 70%, the rule has nowhere to put saving.
• Big debt. Chase says 10% may not be enough for debts, and high-interest debt may need to come first.
• Uneven pay. Percentages of a month that changes are hard to hold. Base them on a lower month.
• You want detail. One big spending number does not show which charges are needs. The 60/20/20 rule splits needs from wants, and our budget categories list sorts them for a couple.