The 30-30-30-10 Budget Rule: How Does it Work?

Will the 30-30-30-10 budget rule work for you? Let’s explore how this budgeting rule works, and how to implement it to better manage your household finances!

We all know that having a budget is crucial…and you’ve probably read it hundreds of times already! But finding the right budget system that works for you is not that simple. 

In this post, we’ll explore the 30-30-30-10 budget rule, which might be just the one you need to put your finances in order and stick to your monthly goals. 

So, how does the 30 30 30 10 rule work and how do you implement it in your life? Let’s find out! 

But First… What’s the 30 30 30 10 Rule?

The 30 30 30 10 rule states that you should divide your expenses into four different categories, and allocate a percentage of your income to each of them. 

With only four categories, this budget rule is simple and easy to apply for those who don’t like having budgets, sitting down every month to go over expenses, or detailed and overcomplicated finance spreadsheets.  

These categories, which we’ll explore more in-depth in a minute, are housing, needs, goals, and wants; the first three will receive a 30% of your income, and the last one a 10%, which you will then divide into the individual expenses of each group.

Let’s say that you earn $10,000 a month (just an example to make calculations easier!). By implementing the 30-30-30-10 budget rule, your housing expenses, needs, and financial goals will receive $3,000 each, and you’ll be left with a monthly $1,000 to enjoy as you please (fun-related things!) 

Let’s see each category and what they entail more in detail. 

Housing: 30%

Housing comprises all your house-related expenses, including the following:

• Mortgage Payments
• Rent
• Property Taxes
• Insurance
• Appliances
• Household Products
• Transportation 

This is very likely the category in which you spend the most, so limiting your budget to 30% of your income might entail making some cuts in certain areas, like using public transportation instead of driving to work every day, or only buying the products and appliances that you actually need. 

Depending on the area where you live, and also on your salary, it may not seem entirely possible to achieve this goal (maybe your rent takes 30% of your income…or more!) But know that ideally, you shouldn’t spend more than that on your household, and we’ll cover later what to do if the percentages don’t match your current expenses. 

Needs: 30%

This category covers every other expense that’s not comprised in the housing group, but that still needs to be paid. These include (but are not limited to!):

• Groceries
• Utility Bills
• Health Insurance (as well as life, property or other necessary insurance)
• School expenses
• Clothes
• Child and pet care

Goals: 30%

Your financial goals are equally important, and what ultimately will help you increase your income or enjoy the life that you truly want and deserve, so you’ll also be allocating 30% of your salary to them. 

Financial and personal goals are often neglected in regular budgets (or if you have no budget), so with the 30 30 30 10 rule you’ll make sure they’re covered. Some examples of goals include: 

• Paying off debt 
• Building an emergency fund
• Saving for a particular occasion (vacation, college, house downpayment)
• Building a retirement fund 
• Starting your own business
• Investing

Wants : 10%

Last but not least, the fun department! You work hard to earn your income after all, so some of it should be available for your hobbies and indulgences.

Budgeting for your wants is as crucial as it is to budget for your needs, or else you could end up feeling deprived and frustrated, resulting in you splurging your rent money or being constantly miserable: no need for either since you have fun money at your disposal!  

The fun/wants category includes anything you do for pleasure, such as:

• Attending a concert
• Going out for dinner
• Buying a new dress
• Streaming subscriptions
• Updating your phone.

Under the 30-30-30-10 budget rule,10% of your salary will be allocated to this group, and you can either use it all or save a bit every month for more expensive, longer-term fun projects. 

And there you have them! These four categories will make sure you pay your bills and stay on top of your debt payments, but that your financial goals and your pleasures are also being taken care of.  

How to Implement the 30-30-30-10 Budget Rule

Decided that this budget rule is for you? Great! Now, how do you implement it in your life? 

▶ First, you need to add up your monthly income. Whether you only have one stream of income or have multiple side hustles, or know that you earn a bonus twice a year, all the money that comes in should be accounted for. 

▶ Once you know that, it’s time to add up everything that goes out – your expenses. When you know your numbers, divide those expenses into the different categories. E.g. your utility bills into the needs column, rent and gas into the housing, and so on. 

▶ The fun part comes here: work on your goals, and define them. Do you want to save for the downpayment of your first house? Create a college fund for your kids? Are you planning a luxurious vacation for your anniversary? Set your financial goals, and figure out how much you should save every month to achieve them – within the 30% limit!

▶ Once you have all those categories lined up, it’s time to divide your income and assign the 30 30 30 10 percentages to the different groups. 

What if your expenses are higher than your budget?

Let’s say that you allocate $3,000 to your needs category, but they actually add up to $3,500. What do you do then? 

For starters, try to make cuts so that you actually achieve the goal of sticking to the 30%. Maybe you’re buying more clothes than you need, or your grocery list is endless and you end up throwing away food. 

If your expenses are completely necessary, your alternative is allocating money from another category – your housing department is likely completely covered, so that’s going to be either your goals or your wants money. It’s not a fun idea, but needs need (pun not intended) to be paid. 

The better option could be to ask for a raise or look for a side hustle that could help you earn more money every month. There are tons of things you can do to increase your income so that you keep paying your bills on time but also have fun.   

So, is the 30 30 30 10 the right budget rule for you?