75/15/10 rule prioritizes needs, investing, and savings

Creating a budget can feel overwhelming, but it is an important step in managing finances. Financial experts suggest several budgeting methods, each catering to different needs. The 75/15/10 rule is one approach. It advises people to allocate 75% of their income to basic needs, 15% to long-term investing, and 10% to short-term savings. This method allows more spending, but may not leave much room for unexpected costs or debt repayment. Experts recommend setting clear financial goals. This could include plans like buying a home or saving for a vacation. Other popular budgeting methods include the 50/30/20 and 60/30/10 plans. The 50/30/20 method suggests spending 50% on needs, 30% on wants, and 20% on savings. The 60/30/10 adjusts those percentages, reflecting recent inflation and higher living costs. Many Americans find budgeting challenging. A recent survey showed that about 64% of earnings go toward necessities, with only a small portion saved. Financial planners emphasize that budgeting guidelines should be flexible. Everyone’s situation is unique, and these are just starting points. To develop a budget that works for you, it's important to review past spending habits. Identifying bad habits can help cut unnecessary expenses. A budget may not be perfect on the first try; adjustments are part of the process. Taking small steps can lead to better financial health over time.