The 70/20/10 Budget Explained

Welcome Back, Fellow Parent

Happy New Year! 

2025 is here, and with it comes a chance to reset, refocus, and make strides toward the goals that matter most—for you, your family, and your finances.

But before we dive into the new year, let’s take a moment to reflect on what we accomplished in 2024.

What financial wins did you celebrate?

Did you stick to your budget, pay down debt, or build your savings?

Taking time to evaluate your spending and saving habits can provide valuable insights to use as pillars for your goals in 2025.

Our family spent the past few weeks reflecting on the last 12 months and planning for the next 3 years. One of our biggest financial goals for the next 18 months is to sell our current home and purchase a new one.

Wish us luck, this market is insane. But a few personal items have come up so it's time to make a change. 

I'd love to hear about your goals for the year. 

If you're open to it, reply to this email with what's on your mind. I'll collect all the responses and share them in a future newsletter.

To get us started on the right foot this year I wanted to share about a newer budget strategy that gained traction in 2024, called the 70/20/10 budget.

Essentially an evolution of the 50/30/20 budget, the 70/20/10 budget helps you create a plan without feeling like you’re sacrificing everything fun or important.

It gives structure to your spending and helps you make progress on those big financial goals, whether that’s saving for your kid’s college, paying off lingering debt, or finally booking that dream family vacation.

Here’s the gist:

• 70% of your income goes toward needs and wants like housing, groceries, and childcare.

• 20% is earmarked for savings and investments.

• 10% is for debt repayment or charitable giving.

Here's an example:

Based on an average U.S. household income of $80,610 annually before taxes, let’s adjust for a 20% effective tax rate, leaving approximately $5,374 in monthly post-tax income.

Here’s how the 70/20/10 budget could work for a family:

70% for Needs and Wants: $3,762

• Rent/Mortgage: $1,612

• Groceries: $860

• Utilities: $400

• Childcare: $650

• Miscellaneous: $240

20% for Savings and Investments: $1,075

• Emergency Fund: $538

• Retirement Contributions: $430

• College Fund: $107

10% for Debt Repayment or Giving: $537

• Credit Card Debt: $430

• Charitable Donations: $107

The beauty of the 70/20/10 budget is that it’s adaptable to your unique situation.

Whether you’re saving for a new home, like we are, or aiming to pay off lingering debt, this strategy helps you prioritize and plan. And remember, no goal is too small or too big—it’s all about progress, not perfection.

If you’re curious to see how this budget can work for your family, now’s the time to get started.

Grab a piece of paper, open a spreadsheet, or consider spending a few dollars on my budget planner (goes on sale for $5 on Friday) to make the process even easier. Having a tool that works for you can be the first step toward building lasting financial habits.

There are many other types of budget strategies out there, including the Savings First, 50/30/20, Cash Stuffing (Envelope Method), and Zero-Based Budgeting.

Outro

Thanks for reading, and please don’t hesitate to reach out with any questions.

Next week I’m kicking off a 3-part series around Taxes. Get excited!

See you next week,

The Dollar Dad

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