What Is The 70/30 Rule?

Budgeting can often get difficult. Even with several apps and advanced spreadsheet skills, you may fail to not breach the line of the ideal amount of spend. This is especially true in the case of people who have just begun to earn.

Often, the problem is the complexity of their plans. They might have a set budget for each of their activities, and when you are just starting to earn, your income may be too small to be able to allocate for all your needs and wants. What could help here is a simplified approach like the 70/30 rule. But what is it? How does it work? And why do you need to budget, to begin with? Read on to find out.

What is budgeting?

Budgeting is when you allocate a certain percentage or amount of your income to certain things. You do this by analysing your income and monthly bills and then compiling all your needs and allocating money for each of them. For instance, if you have a monthly income of Rs.50,000, you may analyse the same and realise you need Rs.10,000 per month to pay the monthly bills, and you can divide the rest for your needs and wants and save a part of the money as well. This may be a strenuous process, but it is important in maintaining good financial planning.

Why should you budget?

Often, the main aim of budgeting is to find enough money to save from your income. You compare the same with how a country or a state announces its budget. If you had paid attention, you would realise the budget will take the whole amount of money they have at their disposal and then divide it between the spending.

Similarly, your budget to ensure that your spending doesn’t go beyond your income and you invest a healthy amount of money.

What is a budgeting rule?

What works best for an individual is finding a budget plan that works for their income and needs. But often, finding the right balance is a hard job. This is similar to creating a new recipe. At first, it might be harder for you to come up with the exact portion sizes for ingredients, so you take the help of already existing recipes.

Similarly, in the case of budgeting, these rules can give you a good head start, and once you find your ground, you may create your working formula. You can choose multiple investment options.

What is a 70/30 rule?

The 70/30 rules say to budget 70% of your income for your monthly spending and save the rest for the future. The rule is simple. It doesn’t describe what you should do with the 70% of the money that you are allowed to spend and rather, gives that authority to the person who is following the rule or creating sip investment. If you have never followed a budgeting rule before or have created a budget before, it may be harder for you to create and follow one for the first time. The rule helps in such scenarios.

Once you find out where all your 70% goes, you may create a further customised plan and budget according. Hence, it becomes important to mark every piece of money that you spend and label it correctly. You may use a spending tracker app or the traditional spreadsheet for the same.


The efficiency of any budgeting rule, including the 70/30 rule, depends on personal attributes as well. What works for one person may not work for another. Hence, the best course of action is to start with a rule and then customise it as you wish.