Is the 60/30/10 Budget Right for You?

You may have heard of the 50/30/20 budget. With this popular budgeting method, you allocate up to 50% of your after-tax income for needs like your rent or mortgage, 30% for wants like dining out and 20% for savings and debt repayment beyond the minimums.

However, an economy with high inflation can make it difficult to keep your spending on needs to 50% or less of your income.

“Over the last couple of years, we have seen pretty substantial inflation across most main spending categories. Housing prices, rent, interest rates and cost of basic goods have all increased dramatically,” said Michelle Waymire, a certified financial planner and financial coach, in an email.

The 60/30/10 budget, while similar to the 50/30/20 method, may be a better fit for people who have to spend most of their income on non-negotiable needs, or those who have a lower income.

Here’s what you need to know before you try out this budgeting method.

What is the 60/30/10 budget?

Under the 60/30/10 budget, you devote up to 60% of your monthly take-home income for needs, 30% to wants and 10% to savings.

“One of the things that the 50/30/20 and the 60/30/10 budget have in common is that they’re just starting points to provide a general allocation for where your money goes,” Waymire said. “Neither of these budget guidelines are meant to be hard and fast rules because everyone’s situation is different.”

Keep in mind that there’s also a less popular approach to the 60/30/10 budget, which calls for putting 60% of your income toward your savings goals, a strategy some people with higher incomes may use as a means to build generational wealth or retire early.

Pros and cons of the 60/30/10 budget

“One of the biggest benefits of the 60/30/10 budget model is that consumers have more funds allocated to non-negotiable items in the present, a flexibility they may need in today’s economy,” said Julie Guntrip, head of financial wellness at Jenius Bank, in an email.

She also noted that the 60/30/10 budget could be a good place to start for people in their early 20s, who are prioritizing life “start-up” costs — like their first apartment or buying a car — as well as short-term spending.

But a potential drawback to spending more money on your essential needs is that you put less toward savings.

“There are downsides to allocating less money towards savings. Carrying high interest credit card debt will be more expensive the slower you pay it off, and for those who work jobs without employer support towards retirement, a 10% allocation for all savings might not be sufficient for your future goals,” Waymire said.

How to implement the 60/30/10 budget

Here are some tips to help you get started with the 60/30/10 budget.

1. Set short and long-term financial goals

Setting clear short and long-term money goals can help kick-start your budget and keep you motivated for the long haul.

“Before starting any budget process, it’s important to have short and long-term goals in mind, such as paying off debt, saving for a vacation, or even building a down payment for a house,” Guntrip said. “Then, take some time to track expenses and understand what money is flowing in and flowing out each month.”

2. Track your spending

Knowing how much money you have coming in and going out is an essential part of any budget. “Looking at actual money flows is important before establishing a budget as it provides the opportunity to evaluate if spending and saving align with goals,” Guntrip said. “A budget is best when it’s grounded in reality, otherwise it’s not as useful.”

You can track your expenses in a spreadsheet or use an expense-tracking app, depending on your personal preference.

3. Focus on an area of improvement

You can make sticking to the 60/30/10 budget a little easier by focusing on the categories where you tend to overspend.

“Most people’s overspending does not happen in the 60% category; it’s primarily in the wants category where we start getting sidetracked,” Waymire said. “To help stay on track with the 30% towards wants, I recommend folks figure out what 30% of income looks like in dollars per month, and then open a separate checking account with a different debit card for that spend.”

Delineating what you spend on wants, whether by using a separate debit card or credit card, can make it easier to keep to the 30% limit.

4. Use budgeting to empower you

Think of budgeting as less of a restrictive tool and more of a way to take control of your finances.

“By being really mindful about your spending, you have the tools to cut down on areas that aren’t a priority, so you can free up money for the important things that bring you the most joy,” Waymire said. “Without a budget, it can be challenging to make sure there’s actually money at the end of the month to put towards your big goals and dreams.”

Also, be open to adjusting your budget as needed to account for the unexpected, and regularly monitor what you spend.