70/10/10/10 Budget: A Simple Guide to Manage Your Money

What is the 70/10/10/10 Budget Rule?

Just like the popular 50/30/20 budgeting rule, the 70/10/10/10 rule (also known as the 70/20/10 rule) is another simple way to divide up your money. It gives you a clear guideline on how much of your income should go toward everyday spending, saving, and paying down debt.

With this method, you take your after-tax (take-home) income and break it down into four parts:

70% goes toward everyday living expenses
10% toward savings
10% toward investments
10% for debt repayment

If one of the categories is eating up more than its share, look for areas where you can cut back. The goal is to get your budget balanced so your money is working for you, not against you.

70% for Living Expenses

Your Living expenses are the things you spend money on to live your day-to-day life. To figure out how much of your take-home pay goes toward these costs, you will need to do a bit of number crunching. Start by adding up your monthly essentials, such as:

Rent or mortgage
Groceries
Utilities
Minimum payments on loans or credit cards
Insurance (car, home or tenant, life, pet)
Transportation (car payments, gas, parking)
Childcare (daycare, after-school programs, babysitting)
Healthcare (dentist, eye doctor, prescriptions, copays)

For this budget, living expenses also cover your non-essential spending, such as:

Gym memberships
Dining out or takeout
Vacations or weekend getaways
Netflix, Spotify, and other subscriptions
Movies, concerts, or sports events
Non-essential clothes, accessories, cosmetics, or hobby gear

Start by looking at the last few months of your bank and credit card statements. It will give you a clear picture of where your money is actually going.

While you are calculating your monthly expenses, don’t forget to include the things you may only pay for once or twice a year, like insurance, subscription fees, car maintenance costs like oil changes, etc. Take the yearly total and divide it by 12 to include it.

Once you see the numbers, you will know if you are staying within that 70% target or if you need to make a few adjustments.

10% for Short-Term Saving

This amount is put aside to start building up your savings for things like building an emergency fund or short-term goals.

Building an emergency fund is important. Think of it like a financial safety net. We all know that life is unpredictable, so having an emergency fund can help you in situations where your car or refrigerator breaks down, or an unexpected bill arrives in the mail. Having some money set aside can help you handle those surprises without relying on credit cards or loans.

But your savings should not just be for emergencies. This 10% can also go toward things you know are coming, like Christmas or birthday shopping, back-to-school expenses, or a down payment on a future car.

To start, take a look at your after-tax income and calculate what 10% looks like. Then, automate it by setting up a monthly transfer to a high-interest savings account (HISA) or tax-free savings account (TFSA) so you are not tempted to spend it. Over time, you will be surprised at how quickly it adds up.

10% for Long-Term (Investment) Saving

This amount is put aside to help you plan for your (or your child’s) future. This is money you are setting aside not for tomorrow, but for the years (or decades) ahead. Whether you are dreaming of early retirement, buying a home someday, or helping your kids with tuition, this portion is all about growing your wealth over time.

Investing that 10% can help your money work harder for you. Instead of sitting in a regular savings account earning very little interest, you can explore options like stocks, bonds, mutual funds, or ETFs to start building long-term returns.

When you are new to investing, it can sometimes seem complicated. But it doesn’t have to be. Many Canadians start with registered accounts like:

RRSPs (Registered Retirement Savings Plans) for retirement savings and tax advantages
TFSAs (Tax-Free Savings Accounts) for flexible investing with no tax on gains
RESPs (Registered Education Savings Plans) if you are saving for your child’s future education

The key is to be consistent. That 10% each month might not feel like a lot right away, but thanks to compound growth, it can snowball into something substantial over time.

To begin your investment journey, talk to a financial advisor or use a trusted online platform to explore your options. Remember, the earlier you begin, the more time your money has to grow into even more money. Your future self will thank you!

10% for Debt Repayment

The final 10% of the budget is all about reducing what you owe.

Start by focusing on high-interest debt first, like credit cards or payday loans. These can cost you the most in the long run, so it makes sense to knock them down as quickly as possible. You can use this 10% to make extra payments on top of your minimums (which we listed under your 70%). When you make more than just the minimum payment, it cuts down interest and shortens your payoff timeline.

If you are not sure where to start, we recommend trying either of these methods:

Avalanche method (tackling debts with the highest interest rate first)
Snowball method (starting with your smallest balance to build momentum)

But either way, the goal is progress, and this 10% gives you a steady way to make it happen.

Some people also choose to redirect this 10% toward something meaningful, like charitable giving or community support. While this is a fantastic idea, we recommend paying off your debts first. Then, once you’ve freed yourself from the weight of debt, this can be a great way to pay it forward and make a positive impact.

Example of the 70/10/10/10 Budget Rule

According to Statistics Canada, the average annual income for individual Canadians was $59,400 in 2023. Dividing that by 12 months gives you about $4,950 per month.

For simplicity, let’s say that’s your after-tax income. Let’s also round that up to $5,000. Using the 70/10/10/10 budget rule, your monthly spending would be divided like this:

$3,500 (70%) for living expenses
$500 (10%) for short-term savings
$500 (10%) for long-term investments
$500 (10%) for debt repayment

Now, let’s use another example with the median annual income for individual Canadians, which was $45,400. If you divide that by 12, you get $3,783.33.

Again, for simplicity, let’s say that’s your after-tax income and round it down to $3,783. Using the 70/10/10/10 budget rule, your monthly spending would be divided like this:

$2,648.10 (70%) for living expenses
$378.30 (10%) for short-term savings
$378.30 (10%) for long-term investments
$378.30 (10%) for debt repayment

However, it’s important to keep in mind that the 70/10/10/10 rule is just a guideline, which means you can adjust the percentages to fit your own financial goals. For example, if you are focused on getting out of debt faster, you might choose to put more money toward debt payments by cutting back on your living expenses. In that case, your budget might look something like this:

$2,269.80 (60%) for living expenses
$378.30 (10%) for short-term savings
$378.30 (10%) for long-term investments
$756.60 (20%) for debt repayment

Then, once you’ve made a significant dent in your debt repayment, you can go back to budgeting with 70/10/10/10.

Benefits of the 70/10/10/10 Rule

One of the main reasons that the 70/10/10/10 budgeting rule stands out is because of how easy it is to understand and follow, and it offers long-term rewards that go far beyond your next payday.

Here’s how this method can support your financial well-being over time:

1. It’s Simple and Straightforward

One of the biggest advantages of the 70/10/10/10 rule is how simple it is. All you do is take your after-tax income and divide it into four categories:

70% for living expenses
10% for short-term savings
10% for long-term investments
10% for debt repayment

That’s it. Just a basic structure that’s easy to remember and apply, whether you are earning $2,000 a month or $10,000. And because it’s flexible, you can adjust it slightly depending on your financial situation while still following the overall concept.

2. It Builds Long-Term Financial Stability

By dedicating portions of your income to both saving and investing, you are building a strong financial foundation.

The short-term savings portion helps you cover unexpected expenses, like a car repair or vet bill, without having to dip into credit. Meanwhile, the investment portion helps grow your wealth over time and supports long-term goals like retirement, home ownership, or your child’s education.

Over time, these small, consistent contributions can add up to significant financial security.

3. It Reduces Financial Stress

Money stress is one of the most common causes of anxiety. Living paycheck to paycheck or scrambling to pay off unexpected bills can take a significant toll on your mental health.

The 70/10/10/10 rule helps reduce that stress by giving every dollar a job. Your essentials are covered, your savings are growing, and your debts are steadily shrinking.

When you have a plan and know exactly where your money is going, you feel more in control, and that peace of mind is invaluable.

4. It Helps You Achieve Financial Freedom

One of the most powerful outcomes of this method is the sense of freedom it can create. By committing to saving, investing, and paying down debt consistently, you are making real progress toward financial independence. That means fewer money worries, more choices, and the ability to focus on what really matters, like travelling, spending time with family, or retiring early.

And once your debt is paid off, that final 10% can be redirected toward something meaningful, like charitable giving, supporting a cause you care about, or simply increasing your savings and investments.

Tips to Help You Stick to the 70/10/10/10 Rule

Creating a budget is a great first step. But sticking to it? That’s where the real challenge begins. The 70/10/10/10 rule offers a clear and simple structure: 70% of your after-tax income goes to living expenses, and the remaining 30% is split evenly between savings, investments, and debt repayment. It’s a great way to stay in control of your money, but success comes down to consistency and a few smart habits.

Here are some practical tips and budgeting advice to help you stay on track:

1. Track Every Dollar

Before you can stick to any budget, you need to know where your money is going. Use budgeting apps like YNAB (You Need a Budget), PocketSmith, or Monarch Money, or even a simple spreadsheet to log your expenses. Review your bank and credit card statements regularly to make sure you are staying within your 70% spending limit.

2. Break Down the 70%

Living expenses can cover a lot, like your rent or mortgage, groceries, gas, internet, dining out, subscriptions, and more. Our tip is to break this large category into these smaller subcategories so you can spot where you might be overspending. For example, if your dining-out costs are eating up too much of the 70%, try to cut back so that you still have enough money for other essentials.

3. Look for Ways to Reduce Your Spending

In the beginning, if you find that 10% of your income isn’t enough to keep up with your debt payments, take a closer look at your budget to see where you can trim some costs. Start by reviewing your living expenses and consider scaling back on non-essentials, like dining out, entertainment, or other splurges.

4. Automate What You Can

Make sticking to the rule easier by automating your finances. Set up automatic transfers so that as soon as that money hits your bank account, you are automatically putting money into your savings account(s), investment account(s), and toward your debt payments. This way, the money is moved before you are tempted to spend it, and it keeps your budgeting on autopilot.

5. Set Clear Goals

It’s important to set specific goals, like:

Saving $5,000 for an emergency fund
Investing in your child’s education
Paying off a high-interest credit card

Having these types of goals makes the 10/10/10 categories feel more purposeful. When you know what you are working toward, it’s easier to stay motivated and make smarter spending choices.

6. Review Your Budget and Adjust Monthly

Your income and expenses might change month to month, and that’s okay. Make it a habit to review your budget at the end of each month and adjust if needed. Did you overspend in one category? Were you able to save a little extra? Use what you learn over time to improve your budget going forward.

7. Use Cash for Spending

This is another trick that can really help if you struggle with overspending. It’s so easy to just tap our cards to pay without thinking about it. But if you only use cash (or even a prepaid card), then you can only spend what you actually have. This method creates a natural stopping point.

8. Stay flexible

Remember that life happens. Unexpected costs come up from time to time. So when one does, try not to panic. One thing you can do is give yourself a bit of wiggle room within your 70% by setting aside a “miscellaneous” subcategory. That way, surprise expenses don’t completely throw off your budget.

9. Stay committed

Finally, our last tip is to just stick with your budget. Remember, budgeting isn’t just about tracking your spending. It’s about setting clear priorities that support your long-term financial health. By regularly reviewing and fine-tuning your budget, you will stay on course and be better positioned to reach your financial goals.

Is the 70/10/10/10 Budget Rule Right for You?

You might be reading about the 70/10/10/10 budget rule and thinking, “This sounds great in theory, but there’s no way I can stick to only 70% for my living expenses.” And that’s completely understandable. Many people find that their current lifestyle or financial obligations push them well beyond that limit. But here’s the thing to remember: you don’t have to get it perfect right away.

The key is to start where you are and gradually work toward the 70/10/10/10 goal. Maybe right now you are more in a 75/10/10/5 or even an 85/5/5/5 situation, and that’s perfectly okay. What matters most is that you are taking the first steps toward becoming more financially responsible.

Over time, as you become more intentional with your money, you will likely find small ways to cut back on your living expenses, whether it’s cooking more at home or buying fewer non-essentials. These small changes can make a big difference and slowly bring your budget closer to the 70/10/10/10 balance.

Remember, this rule isn’t about restriction. It’s designed to give you a clear structure that helps you live within your means, build up your savings, invest in your future, and pay down debt. Eventually, as your habits shift and your income potentially grows, the 70/10/10/10 rule can become second nature.

In the end, it’s not about where you start. It’s about where you are headed. By using this 70/10/10/10 framework as a guide, you will be on the path to managing your money with confidence and building a more stable, financially responsible future.

70/10/10/10 Budget Rule: A Flexible Way to Manage Money

Meet your budget goals with these tips from Embark.