Effective personal finance management is the key to achieving financial stability and independence. Among the personal finance management methods, the 75/15/10 rule is considered a simple and easy-to-apply formula, especially in a volatile economic context.
What is the 75/15/10 rule?
The 75/15/10 rule guides you to divide your monthly income into three parts:
75% for necessities : This is spending on daily living needs such as rent, food, utility bills and other living expenses.
15% for long-term investments : This is for investments that are intended to increase assets in the future, such as stocks, pension funds, or other forms of investments.
10% for short-term savings : This section is used to save for short-term goals or an emergency fund, which helps you deal with unexpected expenses or plans in the near future.
Benefits of applying the 75/15/10 rule
Easy to follow : With clear division ratios, this rule makes it easy for you to track and manage your spending without having to record each item in detail.
Flexible : Allows you to spend 75% of your income on essential needs, helping to reduce daily financial pressure and suitable for many different income levels.
Focus on investing and saving : Dedicating 15% to long-term investing and 10% to short-term savings helps you build a solid financial foundation and prepare for future goals.
Compare with other rules
In the past, rules like 50/30/20 or 60/30/10 were widely applied. However, with the current economic situation, spending only 50% of your income on essential needs may not be practical for many people. The 75/15/10 rule adjusts this ratio, allowing you to stretch your finances to meet your daily needs while still ensuring you invest and save for the future.
How to apply the 75/15/10 rule?
Determine Monthly Income : Calculate the total after-tax income you receive each month.
Income distribution by ratio:
Monitor and adjust : Regularly check and adjust spending to ensure compliance with rules, while being flexible to change according to personal financial situation.
Applying the 75/15/10 rule not only helps you manage your finances effectively but also creates a foundation for financial stability and growth in the future. Start today to build a healthy and sustainable financial life!
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