How To Use the 40-30-20-10 Rule To Boost Your Savings (2024)

Crystal Mayer

·4 min read

If you are struggling with budgeting and saving, there are a number of methods you can use to help you meet your financial goals. One of the most popular is the 40-30-20-10 rule. While the rule differs slightly depending on which money expert you ask, the idea is that you break down your expenses into categories and assign how much money you can spend each month.

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The most common way to use the 40-30-20-10 rule is to assign 40% of your income — after taxes — to necessities such as food and housing, 30% to discretionary spending, 20% to savings or paying off debt and 10% to charitable giving or meeting financial goals. GOBankingRates asked experts from around the country how people should use the 40-30-20-10 rule to boost their savings; here is what they had to say.

Adjust Slightly for More Savings

Laurens Yarpei, a CFA and founder at, said people wanting to truly increase their savings should alter the rule slightly to prioritize that category. He explained, “The 40-30-20-10 rule is a budgeting rule that can help you to save money and reach your financial goals.”

So, if you want to really focus on saving, you can change the percentages to meet that goal — you could, for example, allocate 30% of your income to saving and 20% to discretionary spending.

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Prioritize Your Financial Goals

Jake Claver, financial director at his company, Digital Family Office, and qualified family office professional (QFOP), agrees with putting 40% towards essential expenditures and 30% towards discretionary spending or lifestyle choices, but he believes that people should prioritize their financial goals to determine the other two categories.

In order to accomplish this, he suggested that people “Direct 20% of your income towards financial goals. This can be debt repayment, building an emergency fund or saving for a down payment on a home. With consistent allocation, you’ll see steady progress in your financial journey.”

He also continued, “The remaining 10% goes straight into savings and investments. This might seem like a small portion, but over time, with the magic of compound interest, this can significantly boost your wealth.”

Adjust Percentages To Meet Your Goals

It is important to note that the 40-30-20-10 rule is just a guidepost for people who are struggling to set a budget. Using it as a one-size-fits-all approach may not be beneficial, depending on your goals.

Andrew Lokenauth, a finance and investing expert and founder of The Finance Newsletter, explained that people may need to “adjust percentages to meet your goals, i.e., 25% [to] savings.” He noted that the rule can significantly help increase savings in a number of ways, because it “automatically allocates 20% to savings right off the top.” If done correctly, then “savings is prioritized before discretionary spending.”

For people who are unsure where to start, he suggested that they “open separate savings accounts for [different] goals, automate transfers to savings accounts and review [your] budget monthly and adjust as needed.” He also noted that people should “increase [the] savings rate with raises/bonuses [and] cut discretionary spending before reducing savings.”

Using the Rule in Real Life

Ben Richardson, founder and director of Acuity Training, cautions that the rule may not work for everyone. He said, “The 40-30-20-10 rule is a guideline for people to budget their income in a way that maximizes its use. There are other rules that work in a similar fashion.”

He continued, “An important thing to realize about dividing income as per rule, it only works in ideal circ*mstances, because there are instances where debt repayment and necessities for a month can end up being more than we anticipated. It is not a viable solution that will work for every household — some households have to prioritize money to necessities, as they have a bigger family, etc.”

He concluded, “By using this guideline if you want to maximize your savings, focus any leftover money from the necessities and lifestyle portion into the savings. By increasing your savings, you will be able to earn [more] interest on the money in the savings account.”

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This article originally appeared on How To Use the 40-30-20-10 Rule To Boost Your Savings

How To Use the 40-30-20-10 Rule To Boost Your Savings (2024)


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