A Guide to the 30-30-30-10 Budget Plan

If you’re on this page, that means like most people you are looking for a way to take charge of your finances and start working towards your financial goals. One of the best ways to do that is with a budget.

The 30-30-30-10 budget plan is a budgeting strategy used to improve both short- and long-term financial stability. It’s stricter than other more common budget plans and can therefore help you save more money and pay off debt faster. This budget plan also helps you learn to live on less than you make and save for emergencies and other financial goals.

What is the 30-30-30-10 Budget Plan?

The 30-30-30-10 budget plan is set up by dividing your budget into 4 different categories as follows:

30% goes towards housing expenses

This means you need to take 30% of your post-tax income and that is your budget for all of your housing expenses. Housing expenses include your rent or mortgage, HOA, homeowner or renter’s insurance, etc. It should include all of the things needed for your living situation.

Depending on where you live now, you may already be exceeding this 30% rule. If that’s the case it may be time to take a look at how much you are paying for housing and evaluate whether that fits into your financial goals.

30% goes towards the rest of your monthly expenses

The next 30% of your post-tax income should go to your monthly living expenses. This basically includes everything else you spend to live each month including food, transportation, utility bills, clothing, phone bills, etc.

You may be looking at this asking yourself how you will ever squeeze your remaining expenses into just a 30% budget- check out these 45 ways to save money.

30% goes toward your financial goals

Now, the fun part. The 30-30-30-10 budget allocates 30% of your post-tax income towards your financial goals. These goals can be whatever you need then to be in your current situation.

They can include your retirement goals, saving up for a car, paying off debt, starting an emergency fund, etc.

10% goes towards all of your wants

The last 10% is saved for all the things you want- your fun money. This would be for eating out, buying new clothes, going to the movies, getting cable, etc.

Let’s take a look at an example:

If you earn $4,000 each month after taxes (so, the number you see on your paycheck) then your budget would be as follows.

$1,200 allocated for housing costs
$1,200 allocated for the rest of your monthly expenses
$1,200 allocated towards your financial goal
$400 allocated for entertainment/fun spending

How to make the 30-30-30-10 budget work for you

Evaluate how much money you bring in vs. your current monthly expenses

What does your cash flow situation currently look like? In other words, how much money do you bring in monthly and how much do you spend. This is the first step to figuring out how the 30-30-30-10 budget can help you.

This may require tracking your spending. There are many ways to do this, from using a simple spreadsheet on your computer or phone, to dedicated budget software like Mint or Personal Capital that can help as well.

See related: Clever Fox Budget Planner

Evaluate what areas you need to cut to fit into the 30-30-30-10 budget percentages

When you lay out your current monthly spending you may find that you are already spending more than 30% of your money on housing. This is the most common situation for most people, but it’s also usually easy to reduce this percentage by moving or downsizing your living situation. Take a look at some of your options like getting a roommate, moving in with family, or moving to a lower cost of living city.

You may find that your general monthly expenses are greater than the 30% goal. Where can you cut costs here? Can you cut your cable or start using coupons and eating in more?

Lastly, look at how much money you allocate towards fun purchases.

If your “fun/entertainment” spending is higher than 10% consider cutting back here as well. This category should technically be the easiest to reduce as these items are wants and not needs.

Be flexible and adjust your lifestyle

You may have to slowly adjust your lifestyle to meet your monthly targets. Adjust accordingly until you’ve reached an agreement with yourself about where each dollar needs to go.

If you have been tracking your own personal budget for a while now and find that 30-30-30-10 is much lower than each dollar is going right now, don’t be afraid to challenge these percentages. Can you save more in another area?

The 30-30-30-10 is pretty simple and straightforward once you know how it works. This plan will make you more aware of what you are spending your money on each month which is the first step in becoming financially aware.

This plan is important because it makes people more conscious of their spending habits. By not overspending on planned expenses, they are able to save money in both the short term and long term which increases financial stability.

Determine what your financial goal is

The most important factor in your success is setting your financial goal– the goal 30% of your money will go towards each month. It’s important to clearly define your goals so you can track your progress each month which will help in motivation.

Before deciding on a monthly goal, think about where you want to be in 5 or 10 years. What do you see yourself doing? Do you see yourself traveling the world, working at the same job but making more money, buying a house, having children, retiring?

Spell out your goal before you begin your journey.

Benefits of the 30-30-30-10 budget vs other budgets

The benefit of the 30-30-30-10 budget is that it allocates a large percentage towards your financial goals. Other plans like the 50-30-20 allow for more spending towards fun purchases (30%), but do not allocate as much for your financial goals (20%).

The 30-30-30-10 budget is more strict than other plans because it requires a larger percentage towards financial goals. This plan is also beneficial because it provides better clarity when setting up monthly spending. Other plans have vague guidelines which require entering separate categories for each purchase, whereas this plan gives you general categories to shoot for. If you are new to budgeting it is still recommended that you track all of your expenses each month until you’re more familiar with where your money is going each month.

So, what are the other budget options?

The 50-30-20 budget plan

The 50-30-20 budget plan allocates 50% of your income towards needed expenses, 30% towards financial goals and 20% towards fun purchases.

With this option you save less for your financial goals and have overall less total allocated money towards housing and expenses. However, you do get 30% allocated for spending which provides more flexibility for those that aren’t looking to cut down as much on fun and entertainment.

The 70-20-10 budget plan

The 70-20-10 budget plan allocates 70% towards both your monthly expenses as well as fun purchases, 20% for financial goals and 10% towards debt pay down. This budget plan is less structured than the other budget plans as it lumps all of your expenditures, both essential and fun, into one 70% category. This can make it difficult to track as you may not be able to hone in on areas to improve on.

Final thoughts: 30-30-30-10 Budget Plan

The 30-30-30-10 budget plan is the best option for making progress on your financial goals. It allows for an organized structure to track your income and expenses which will help you understand and fine tune your monthly spending.

Budgeting, or learning how you spend your money, is key to reaching financial independence. By monitoring your spending, you can save more money in the long-term which helps you reach your goals faster and without sacrificing things that are important to you down the road.

The 30-30-30-10 budget plan is easy to understand once you get started, so jump in and start your journey today.