What Is the 75/15/10 Rule? A Simple Path to Better Budgeting
Written by
Jacob Wade
Edited by
Melanie Grafil, M.A., CHFC™
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The 75/15/10 rule is a simple budgeting framework with 3 easy rules to follow:
- Spend 75% of your take-home income on all spending
- Invest 15% for long-term growth
- Save 10% for short-term goals and emergencies.
It’s designed to give you a clear financial structure without forcing you to track every category or restrict your day-to-day spending.
As the cost of living continues to make obsolete traditional budget models, the 75/15/10 rule offers flexibility and breathing room for your budget. Unlike the 50/30/20 rule, which limits needs to 50% — a near-impossible target in many areas, this approach acknowledges reality while still prioritizing your savings and long-term wealth.
How the 75/15/10 Rule Works
The 75/15/10 Rule break down your budget into 3 distinct sections:
75%: All Spending (Needs and Wants)
This bucket covers everything you spend money on, including fixed costs and the fun stuff alike. Instead of dividing your expenses into rigid categories, you’re simply making sure your total monthly spending fits within this 75% cap. It’s the part of the rule that gives budgeters flexibility and breathing room.
This 75% includes things like:
- Rent or mortgage
- Utilities, insurance, phone/internet
- Groceries and household supplies
- Gas, transportation, car payments
- Dining out, entertainment, hobbies
- Subscriptions and streaming services
- Clothing and personal spending
The beauty of this system is that you’re not breaking your budget into dozens of categories.
Keep in Mind
You’re simply asking one question: “Does my total spending stay under 75% of my take-home income?” If it does, you’re good. If not, you know where to focus your adjustments.
15%: Long-Term Investing
This portion of your income is dedicated to building future wealth. It’s not about having the “perfect” investment strategy, it’s about contributing consistently so your money grows over time. One caveat is that any employer retirement match counts toward this 15% goal, which can make the target much easier to hit.
This 15% can go toward:
- 401(k) or 403(b) contributions
- Employer 401(k) match (included toward your 15%)
- Roth or Traditional IRA contributions
- Brokerage account investing
- Long-term real estate investing
This bucket is about consistency, not complexity. Even if you’re starting small, the habit of automating long-term investing is what builds real wealth over time.
10%: Savings for Short-Term Needs
This final bucket is your financial cushion. Early on, this money goes straight into an emergency fund kept in a high-yield savings account. Once you’ve built a few months of expenses, you can redirect this 10% toward short-term goals.
This 10% is typically used for:
- Emergency fund contributions
- Travel and vacations
- Car repair or replacement fund
- Home projects or moving expenses
- Big expected expenses — weddings, medical bills, etc.
This is the money that keeps “life happens” moments from turning into credit card debt.
75/15/10 vs. 50/30/20: Which One’s Better?
Both methods work, they just serve different types of budgeters.
The 50/30/20 rule breaks down your spending as follows:
- 50%: Needs
- 30%: Wants
- 20%: Investing/savings
The 50/30/20 rule is excellent for people who like structure and want to analyze their spending more closely. If you enjoy categorizing and optimizing every part of your budget, this rule gives you a clear framework. It’s also best for people that have lower necessary expenses and place a high priority on putting money toward “Wants” and “Savings.”
The 75/15/10 rule, on the other hand, is for big-picture budgeters. It appeals to people who want to hit their savings and investing goals without having to micromanage every purchase. In high-cost areas or higher-expense life stages, it’s often the more realistic option.
Think of 50/30/20 as a detailed map and 75/15/10 as a wide-angle compass. Both point you in the right direction, the latter simply lets you breathe a little.
How To Start Using the 75/15/10 Rule
Getting started is surprisingly easy.
- Begin by calculating your monthly take-home income.
- From there, automate your financial goals so they happen before you can spend the money.
- On payday, set up automatic transfers so that:
- 15% goes straight into retirement or investment accounts
- 10% moves into a high-yield savings account
This “pay yourself first” approach ensures the system works even on busy months when you don’t want to think about budgeting.
The remaining 75% becomes your spending pool. You don’t have to track every transaction unless you want to. Most people simply do a check-in at the end of the month to make sure their spending stays within the limit. And as your income, rent, or goals change, the rule adjusts with you, so there’s no need to overhaul your whole system.
Pros and Cons of the 75/15/10 Rule
Pros
- Much simpler than detailed category-based budgets
- More realistic in high-cost living environments
- Savings and investing happen automatically
- Allows for everyday enjoyment within the 75% bucket
- Easy to maintain long-term
Cons
- Less structure if you prefer detailed tracking
- Requires discipline not to overspend from the 75% bucket
- Not ideal for those needing an aggressive debt-payoff approach
Final Thoughts
The 75/15/10 rule offers a simple, flexible alternative to traditional budgets. It works especially well for people who want structure without micromanaging their spending, and for anyone feeling squeezed by today’s cost of living. If the 50/30/20 rule feels unrealistic or too rigid, this method gives you a clearer, more achievable path forward.
