A budget for expenses, whether small or high-impact, can be paired with a fairly balanced percentage for each category. But the money still does not stretch as far as we had in mind. We can change that with the Golden Rule 70-10-20.
In broad terms, this is a rule that works not just for saving or entrepreneurship — it works for life itself.
What is the Golden Rule 70-10-20?
This rule divides your budget into percentages of 70, 10, and 20 — a stable allocation that allows you to see the growth of your money, your savings, and your life.
It consists of 3 points, each corresponding to one of the percentages — 70, 10, and 20:
- Point number one.
Expenses. This goes directly to services and tax payments, food, and transportation — everything that is vital for surviving day to day and that we use continuously without fail, such as electricity, gas, and water.
Expenses receive 70% of your income, as they represent the highest consumption and are vital to your life. (Remember, only the essentials — do not mix the necessary with wants and luxuries.)
- Point number two.
Wants and entertainment. This covers things that do not need to be included in your primary expenses — you could say this is your lifestyle, your preferences, luxuries, entertainment, and similar things.
Here you can include things like games, trendy clothing, snacks, sodas, accessories, souvenirs, etc. This point gets 10% of your income, as it is not of vital importance but rather for fun, luxury, and style. (Luxuries can include branded water like Epura, Ciel, or Bonafont, as well as fast food, internet, and cable TV.)
- Point number three.
Savings. This is vital in this budget framework for the growth of your venture and your life, as it is where you can build up a notably significant sum that will, in the long run, serve as your lifeline or an extra source of income — as well as a personal retirement fund. As with all savings, it should not be touched unless absolutely necessary and falls within essential expenses. Otherwise, it should not be touched. This point receives 20%, as it will be your safety cushion. (Do not touch it unless absolutely necessary; you must replenish it as soon as you have another income, as quickly as possible.)
Takeaway
Now that you know the Golden Rule, you can manage your money and your life better, because if you learn to organize your income, you can organize your way of living.
This rule is not just for income — it is a way of life.