What is the 75 15 10 Rule?
The 75 15 10 rule is a simple way to divide up your money that helps make saving and spending easier. It’s a budget guideline that splits your income into three main parts. When you get paid, you put 75% toward needs and wants, 15% toward savings, and 10% toward paying off debts. This rule gives you an easy-to-remember plan that helps you cover daily costs while still building savings and getting rid of debt.
How the 75 15 10 Rule Works
The 75% Portion
The biggest chunk of your money (75%) goes to cover all your regular living expenses. This includes things you need like rent or mortgage payments, groceries, utilities like electricity and water, transportation costs, and health care. It also covers things you want but don’t absolutely need, like eating at restaurants, entertainment, shopping for clothes, or hobbies. The 75% portion handles your day-to-day life expenses.
The 15% Portion
The next 15% of your income is set aside for savings. This money helps build your financial future and safety net. Your savings might include an emergency fund to cover unexpected costs like car repairs or medical bills. It could also include saving for bigger goals like buying a house, taking a vacation, or retirement. The key is putting this money aside before you’re tempted to spend it on other things.
The 10% Portion
The final 10% of your money goes toward paying off any debts you have beyond the minimum payments. This could include credit card balances, student loans, car loans, or personal loans. By dedicating this portion specifically to extra debt payments, you can reduce what you owe faster and pay less interest over time. Once you’re debt-free, this 10% could be added to your savings or investments.
Comparing the 75 15 10 Rule to Other Money Rules
| Budget Rule | Breakdown | Best For | Strengths | Challenges |
|---|---|---|---|---|
| 75 15 10 Rule | 75% living expenses, 15% savings, 10% debt | Beginners with some debt | Simple, balanced approach | May need adjusting for high debt or low income |
| 50 30 20 Rule | 50% needs, 30% wants, 20% savings/debt | People with moderate income | Clear separation of needs vs. wants | Housing costs may exceed 50% in expensive areas |
| 80 20 Rule | 80% expenses, 20% savings | Those with little or no debt | Very simple to remember | Doesn’t specifically address debt reduction |
| 70 20 10 Rule | 70% expenses, 20% savings, 10% giving | Those who prioritize charity | Includes charitable giving | May be hard for those with significant debt |
| Debt Snowball | All extra money to smallest debt first | People with multiple debts | Psychological wins from paying off small debts | May pay more interest over time |
| Zero-Based Budget | Every dollar assigned a specific purpose | Detail-oriented people | Very precise, no wasted money | Requires more time and tracking |
Advantages of Using the 75 15 10 Rule
Easy to Understand and Follow
One of the biggest benefits of the 75 15 10 rule is how simple it is. Unlike complicated budgeting systems that track many different categories, this rule has just three big buckets. The simplicity makes it more likely that people will stick with it. When a budget is too complex, many people give up quickly. The 75 15 10 rule is easy enough for almost anyone to remember and follow.
Balanced Approach
This rule creates a balanced approach to money management. It recognizes that you need most of your money (75%) for living expenses. At the same time, it makes sure you’re building for the future with savings (15%) and getting rid of financial burdens by paying down debt (10%). This balance helps you take care of today’s needs while still preparing for tomorrow.
Flexibility Within Categories
While the rule sets clear percentages, it allows flexibility within each category. In the 75% living expenses portion, you can decide how much goes to housing versus food versus entertainment. If you want to spend less on eating out and more on hobbies, that’s your choice as long as you stay within the overall 75%. This flexibility helps the rule work for different lifestyles and preferences.
Making the 75 15 10 Rule Work for You
Adjusting the Percentages
The standard 75 15 10 breakdown might not be perfect for everyone’s situation. If you have a lot of debt, you might need to use 20% for debt payoff and reduce your living expenses to 70%. If you live in an expensive city, you might need 80% for living expenses and reduce the other categories temporarily. The key is using the rule as a starting point and adjusting it to fit your specific needs.
Automating Your Savings
To make sure you follow through with the 15% savings portion, set up automatic transfers from your checking account to your savings account. This way, the money moves to savings as soon as you get paid, before you have a chance to spend it. Automation helps make saving a habit rather than a decision you have to make each month.
Tracking Your Progress
Keep track of how well you’re sticking to the 75 15 10 plan. You might use a budgeting app, a spreadsheet, or even a simple notebook. Review your spending regularly to see if you’re staying within the 75% for living expenses. Watch your savings account grow with the 15% contributions. And celebrate as your debt shrinks thanks to the 10% extra payments.
When the 75 15 10 Rule Might Not Work
The 75 15 10 rule works well for many people, but it’s not perfect for every situation. If you have very high debt payments that already take more than 10% of your income just for minimums, you’ll need a different approach. Similarly, if your income is very low and basic necessities take almost all your money, you might need to focus on increasing income before this rule becomes practical. The rule also assumes you have regular, predictable income, which isn’t true for everyone.
Frequently Asked Questions
How is the 75 15 10 rule different from the 50 30 20 rule?
The main difference is how expenses are categorized. The 50 30 20 rule splits expenses into needs (50%), wants (30%), and savings/debt (20%). The 75 15 10 rule combines needs and wants into one 75% category, then separates savings (15%) and debt payoff (10%). The 75 15 10 rule might be easier for beginners because you don’t have to decide what counts as a need versus a want, but the 50 30 20 rule might help people who tend to overspend on wants.
What should I do if my basic living expenses take more than 75% of my income?
If your necessities exceed 75% of your income, focus first on whether there are any ways to reduce those costs (like getting a roommate or finding cheaper transportation). If that’s not possible, you might need to temporarily use a modified version of the rule, like 85 10 5, while working on increasing your income. Even saving just 5% is better than saving nothing. As your income grows or expenses decrease, you can gradually move toward the standard 75 15 10 breakdown.
Where should I put the 15% savings portion?
Start by building an emergency fund in a regular savings account until you have at least $1,000 (eventually growing to 3-6 months of expenses). Once you have that safety net, you might split the 15% between different goals. Some could go to retirement accounts like a 401(k) or IRA, some to saving for bigger purchases like a car or house down payment, and some to continuing to build your emergency fund. The specific accounts depend on your goals and timeline.
What if I have no debt? Where should the 10% go?
If you’re debt-free, congratulations! You have several good options for that 10%. You could add it to your savings, making it a 75 25 0 rule. You could increase your retirement contributions, which might help you retire earlier. You could save for a specific goal like a home, education, or starting a business. Or you could use some of it for charitable giving if that’s important to you. Being debt-free gives you more flexibility with your money.
Can I still use this rule if I have irregular income?
Yes, but it requires some adjustments. With irregular income, calculate the percentages based on what you actually receive each time you get paid. During higher-income periods, you might even save more than 15% to help cover lower-income periods. It can help to build a larger emergency fund if your income fluctuates significantly. Some people with irregular income find it helpful to pay themselves a “regular salary” from their earnings to create more stability.