The 50 30 20 Budget vs. the 70 20 10 Budget

Are you wondering how to use the 50 30 20 budget, the 70 20 10 budget or what the difference is? Or suppose you find yourself in a financial mess and can’t figure out how to intelligently tackle some unanticipated needs. In either case, you are on the right page. This article is dedicated to filling you in on all the details about 2 of the most popular budgeting methods: the 50 30 20 and the 70 20 10 budgeting rules.

You might have heard about one or both of these budget methods. The different percentages are not the only points of difference between the two. These shifts in numbers lay a significant impact on one’s life, and if you ever were to use both of these rules, you would know how drastically they differ in actuality. However, you must understand that both are used for distributing your total expenditure, saving, and sharing.

Spending takes the lion’s share in both types of budgeting rules while saving is the center percentage. And, of course, the littlest chunk of the pie goes for the remaining – the sharing or donating feature.

Why Deciding on a Budget Strategy is Important

The first question that would come to your mind while reading these percentages would be related to the necessity of their use. Do you even need to do this? Why would you want to move with a thoughtful strategy? What results would you procure if you proceed with a specific strategy? Let’s see to these questions.

For starters, budgeting with a strategy would help you to identify your available capital to be invested. It also gives you an estimated guess for the expenditure by anticipating the incoming revenue. By referring to this budget, you can analyze your monthly performance. Measuring your ability to set aside monies and not spending them all immediately. It allows you to be successful in different ways, such as better cash flow and cost reduction.

Budget Blueprint

When you have this blueprint designed for you, you will find it relatively easy to control and plan the finances that come as they may. If you have no control over the way you spend and have futile planning, it is pretty much likely that all your objectives for the future would be hard to achieve, especially those that are influenced directly by money.

For example, if you are running a business without such a strategy, you will find yourself running in circles. You must be able to measure profit, business growth, and development for your long-term goals. As you use your time to set your budget wisely, you will save time and frustration if you stick to it.

What is the 50 30 20 Budget Strategy?

You know the drill. The comparison of the 50 30 20 budget is made clear by how the percentages are distributed. Now let’s check out their distribution in detail.

The 50%

The 50% of your total income is meant to be spent on your necessities according to this budgeting model. As we all know, the necessities of life are something no one can ignore or put in last. So, you would have to give them a priority in every case. The necessity criteria change according to the individualized needs of a person. However, this chunk is spent on things like housing, transportation, food, basic utilities, and insurance for an average person. Some people might also include minimum loan payments that are to be made frequently. If the amount surpasses the minimum bracket, it has to go into the next two percentages.

The 30%

The 30% chunk of your income should go for your wants. Now, it is important to know-how needs and wants to differ from each other. They can be pretty much the same for different individuals. They can vary, however, depending on personal preferences and priorities. Wants are not something you cannot live without. They are however, a part of life that can improve your sense of satisfaction. These can include entertainment, travel, monthly subscriptions, and eating out.

The 20%

Then comes the last part – 20%, which goes to your savings and debt. Now, savings is the quantity you store for future expenditure or emergencies. This chunk of your income is exclusively present for paying the existing debt you may have first. Next, it can help by creating a good financial cushion for yourself that you can use to avoid taking on any future debt.

Now, the way you utilize this part of the budget depends entirely on the situation you face. Still, from a larger perspective, it will include growing an emergency fund, saving for your retirement, or saving a whole retirement account, paying off loans, and others.

Who is the 50 30 20 Budget For?

This 50 30 20 budgeting rule is best for the people who do not have the energy or the time to track their spending in detail. This budget requires one to track and then divide the expenditures into only three main categories: Your needs, your wants, and then for your savings and/or debt. It would reduce any time you would have for spending on the detailing of your finances, and it would enable you to focus a lot more on the big picture.

For figuring out the amount in the currency for each category, you would have to calculate your income and then proceed by the percentage rule.

What is the 70 20 10 Budget Strategy?

The 70 20 10 budget strategy suggests that you allocate 70 percent of your total income to your expenses, the next 20 percent to your savings, and the next 10 percent to any debt you may have.

The 70%

Now, you need to designate the bigger chunk for your expenses, including the needs and the wants. Including any groceries, your rent or mortgage, your living expenses in general. With the budgeting plan, you could see the 70 percent include a large pile of your income dedicated to your spending.

The 20% (as 10/5/5)

The next part is the 20 percent chunk that ought to be dedicated to your savings. It would break down into three further categories. The first category you would have is the 10 percent which goes for your retirement. If you are considerably younger and far from the retirement scene, this might not be a priority for you. It has been guessed that an average retiring couple would have an average cost of 250,000 USD for healthcare alone. If you come to put aside the funding for this stage, the lack of time you would have in the future to make up for the deficit could be damaging.

You can set aside the five percent for any emergency that might come. It can cover the risks of an accident or unemployment. All the unanticipated expenditures that induce stress should have a backup, and that 5 percent is the deal that is aimed to alleviate that stress.

You are then left with five percent that is saved for certain goals to achieve within a set time frame. You can pigeonhole some extra money for stuff such as tuition and others. Just like your emergency funding, this five percent is actually about planning for the future. It would pretty much stop you from impulse buys that can even land you in debt.

The 10%

The next chunk, 10 percent, is allocated for debt payments. This would go straight for managing student loans, car loans, credit cards, and healthcare debts, for instance.

Who Should Use the 70 20 10 Budget?

On a general note, this plan for budgeting is specifically made for people who want to get some healthy amount of emergency debt stored for them. Those who have minimal debt can also work with this plan as it dedicates the least amount of the net income for this slot. If you are a detail-oriented person and want to get yourself all the ins and outs regarding your total income, this plan is the best for you.

Just like the 50 30 20 budget, you would have to calculate your total income first to find out all the percentages.

What is the Best Budget Strategy?

The rules are generally a matter of personal preferences and have their differing applications. Their value varies according to your specified requirements. By my observation, the 50 30 20 rule is more often effective. In this rule, you spend around half of your money on the basic necessities of life and fix a percentage for your wants. The remaining goes for the savings and basically everything that comes into neither needs or wants category, such as debts.

The best thing about this budgeting method is the simplicity that comes with it. Over long-term use, anyone who follows such guidelines would have a debt that is properly managed. giving enough room to let you have your wants fulfilled, and the savings and debt repayment plans for paying unforeseen expenses with a comfortable retirement.

Since there are only three big chunks that you need to take care of, you can easily stay within the limitations of your categories.

Is Saving the Same As Investing?

When you are using words like investing and saving, most people would think of these as interchangeable terms. For instance, if you are “investing” in real estate, most people would think that you are doing this to “saving” your money by solidifying your money.

While these two terms are pretty much similar in terms of their use, it is important to acknowledge that they are different from each other in a lot of aspects.


Let’s begin with the type of assets that you use in each account. As you consider saving, you would think about direct bank products, including money markets, savings accounts, and certificates of deposit. On the other hand, investing most often points to ETFs, stocks, mutual funds, and bonds.

One can’t decide which is better in its entirety, and the right choice would pretty much depend on the situations you are going through. As a general rule of thumb, you would have to follow these points:

If you want financial resources in a time frame of less than a year, or you want to utilize emergency funds at any time, you can go with savings.

On the other hand, if you are not looking forward to spending that money anywhere within three years to the least, and if you have the capacity to withstand the financial loss in case of some intervention, then go for investing your money.

For example, if you want to pay off your child’s tuition fee in a few months, you can save your money in a short-term certificate of deposit or a savings account. You really would not want to invest in something, knowing that you would need that money within a year at least. This would be pretty much similar to gambling and hoping for the best thing to happen. The same observation applies to emergency funds.


On the other hand, if you are able to have your money saved for the longer-term, you can invest them. It would be a brilliant choice when you are sure you do not need any access to the money in a short time to come. Checking into the details of the stock market, growth-stock mutual funds, and similar things would be an amazing way to get things started with investing.


How do I stop living paycheck to paycheck?

The first and most important thing is to discover where you are spending your money. Often people spend lots of money without realizing where it is going. Using a budget is the fastest way to find out where you spend your money, the second is to spend it more wisely. The 50 30 20 budget is a great place to start.

How do you save money when your broke?

The key is to adjust your mindset, money does not care how much you make, it cares how you spend it and how much you save. Force yourself to change your habits of spending and create a budget then stick to it. The 50 30 20 budget is a great place to start.

Take This with You

As we have seen, having a clear budget strategy that you can apply well to your circumstances and personal preferences is beneficial in every aspect. If you want to see how quickly you can pay off all of your outstanding debts using these budgets, be sure to download my FREE Debt Snowball Tool. It will show you how easily you can use your new budget to pay off your debts fast.

After you download the debt calculator be sure to join my Facebook Page and publicly proclaim your plan to pay off all your debt. When you make your intentions public, you invoke the power of the law of attraction. Your intentions become not only more real, but you then become more likely to complete your goal.


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Aaron Jarrels

I am focused on helping anyone who wants to expand their reach. I help people overcome their limiting beliefs and show them how to gain the confidence to eliminate imposter syndrome that hinders success. I specialize in assisting people with shifting their mindsets and help them master the skills necessary to achieve professional and personal success.

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