What Is the 75/15/10 Rule? A Simple Path to Better Budgeting

Geber86 / Getty Images

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

The 75/15/10 rule is when you split your income three ways:

• 75% goes to everyday expenses
• 15% goes to long-term investing
• 10% goes to short-term savings

Unlike the 50/30/20 rule, this method prioritizes savings goals over paying off your debt and discretionary spending.

How the 75/15/10 Rule Works

This is how your income will fit into each category:

75% to Daily Living

This major portion of your income goes towards your daily living costs. Think rent, groceries, car payments and other monthly expenses.

15% Invested for Future Growth

This is your future-focused fund. By putting 15% of your income into investments like stocks or real estate, you’re not just saving — you’re growing your wealth.

10% Saved for Emergencies

The final 10% of your income is your emergency fund, meant for unexpected expenses.

The goals is to build a reserve that can cover around six months of living expenses, giving you peace of mind and financial security in case of something like a sudden medical bill or a job loss.

The 75/15/10 Rule: A Step-by-Step Guide to Getting Started

1. Know your income and expenses. Start by getting a clear picture of your monthly take-home pay and where it’s currently going.
2. Adjust your spending. Look at your current expenses and see if they align with the 75% guideline. If not, identify areas where you can cut back.
3. Explore investment options. If you’re new to investing, start small and educate yourself on different investment types that not only fit your risk profile, but also your interests.
4. Build an emergency fund. Aim to gradually save up to six months’ worth of living expenses, starting with whatever amount you can afford regularly.
5. Be flexible with changes. As your life circumstances change, be ready to modify your budget to keep up with your needs.

Pros 

• It’s easy to track and keep you from overspending.
• It allows for more spending than other budgeting plans.
• If you are new to stricter savings regimes, this is a great way to allocate your funds to either long-term or short-term goals.

Cons

• The savings portion is low compared to the common financial advice of putting away at least 20% of your paycheck each month. 
• If you have a large amount of debt, this method won’t help you pay it down quickly.
• Many people would struggle to allocate 25% of their paycheck to either investing or saving.

Build Your Better Budget

The 75/15/10 rule is a way to make sure you are spending, saving and investing your money wisely. However, while this budgeting rule offers a straightforward framework for managing finances, it’s not without its pitfalls.

Those with variable incomes or high living expenses may not have enough left over for saving and investing. People who have large amounts of debt to pay off should consider a different framework. Here are other budgeting methods to explore.

Share This Article: