If you hate budgeting, try the 80/20 rule to save money without tracking every single expense (2024)

FAQs

If you hate budgeting, try the 80/20 rule to save money without tracking every single expense? ›

How the 80/20 rule works. The first 20% of your paycheck should automatically go toward investments, savings or debt repayment, starting with an emergency fund that covers three to six months of your expenses. By doing this, you pay yourself first by putting money aside for your long-term financial goals.

YOUR BUDGET

The 80/20 budget is a simpler version of it. Using the 80/20 budgeting method, 80% of your income goes toward monthly expenses and spending, while the other 20% goes toward savings and investments.

Separating your known monthly bills into a separate account and setting them on auto-pay might revolutionize your relationship with money. This account is for things with due dates and relatively set amounts like rent/mortgage, cable, cell phone, etc. You may need to estimate for things like electricity and gas.

The Pareto principle states that for many outcomes, roughly 80% of consequences come from 20% of causes. In other words, a small percentage of causes have an outsized effect. This concept is important to understand because it can help you identify which initiatives to prioritize so you can make the most impact.

This rule suggests that 80% of effects come from 20% of causes. For example, 80% of a company's revenue may come from 20% of its customers, or 80% of a person's productivity may come from 20% of their work. This principle can be applied to many areas, including productivity for small business owners.

The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).

The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.

Without a clear picture of finances and the added risk of operational expenses costing up to 20% more inclusive of late fees, you are missing opportunities to save, even a little amount every month toward financial goals. If you are NOT tracking expenses, financial goals are purely theoretical!

Is it healthy to keep track of every dollar I spend? ›

To a certain point this is a very healthy and rational attitude. However, spending too much time this way can deform the way you see your money and lead to you being obsessed with your account. Money is an aid, not the goal. I would personaly start with identifying where this pattern comes from.

Keeping track of your expenses on a regular basis is an important part of managing your overall finances. Not only does it help you see where your money goes, but it can also reveal to you your spending patterns.

Overspending can happen for different reasons, such as: You might spend to make yourself feel better. Some people describe this as feeling like a temporary high. If you experience symptoms like mania or hypomania, you might spend more money or make impulsive financial decisions.

The average monthly expenses for one person can vary, but the average single person spends about $3,405 per month. Housing tends to consume the highest portion of monthly income, with the average annual spending on housing at $1,885 per month per person.

The 80/20 rule is a concept suggesting that 80% of your results come from 20% of your efforts. This rule can be used in various contexts; however, investing experts caution against using it in portfolio management.

It says your total debt shouldn't equal more than 20% of your annual income, and that your monthly debt payments shouldn't be more than 10% of your monthly income. While the 20/10 rule can be a useful way to make conscious decisions about borrowing, it's not necessarily a useful approach to debt for everyone.

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

80/20 Rule: With this method, you immediately set aside 20% of your income into savings. The other 80% is yours to spend on whatever you want, no tracking involved.