What Is the 75/15/10 Rule? A Simple Path to Better Budgeting

Investment Analysis Clubs Macro Economic Trends and Risks
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The article linked below offers an interesting (to me) metric for retirement budgeting:

75/15/10
75% is ‘monthly expenses’
15% is ‘future growth, savings, ‘wants’ and such’
10% is emergency fund.

What Is the 75/15/10 Rule? A Simple Path to Better Budgeting

{ The 75/15/10 rule is when you split your income three ways:

  • 75% goes to everyday expenses
  • 15% goes to long-term investing
  • 10% goes to short-term savings

Unlike the 50/30/20 rule, this method prioritizes savings goals over paying off your debt and discretionary spending. }

This article describes using the 75/25/15 rule with a $2M retirement account.

What $2 Million in Retirement Savings Looks Like in Monthly Spending

I been (mostly) following this ‘budget strategy’ without ‘knowing I was following it’. I cover my ‘monthly expense’ and ‘save’ any excess… until I find some ‘want’ on which to spend it.
I really have a 75/25, with the 25 being combined ‘savings and e-fund’. ie The ‘savings’ is also the ‘e-fund’… and so far, I’ve not been forced into a true ‘emergency’ situation that requires ‘stressing my funds’.

:bowling:
ralph

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We have discussed before. If you can manage it best is to live on one third of income, save one third (including Ira, 401k, and taxable investments), and one third for taxes.

This program should let you retire at 20 years.

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The article, putatively, is post retirement.

I’d never seen, that I recall, the x% /y% /z% concept applied to post retirement.
Or perhaps better said: I don’t recall seeing retirement budgeting expressed this way.

The first x% is LBYM advice.

The y% n z% are have a “luxury wants” fund, and an emergency fund.

:watermelon:
ralph

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Budgeting does work. And does help you reach your goals. When the budget covers your needs.

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That was my thought, too.

Just like pre retirement, if the income barely meets basic needs, or fails to cover basic needs … Life is tough.

I’m a lucky :duck:!

In the sense that “luck favors those who are prepared”.

:duck::duck::ox::duck:
ralph

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This method doesn’t make a ton of sense. What he’s saying is that of your 4% initial withdrawal, you spend 75% and save/invest 25%. Which is mathematically the same as just having a 3% WR. That’s fine, but now you need $2.6 million to maintain the same lifestyle as a person using a 4% WR.

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Mostly that 4% is about living below your means. As you learn to do that it pays multiple times. You learn to live economically and you increase your savings/investments. And that makes easier to reach that 4% with lower living costs and larger savings.

If you want to retire early it is worth the effort. Not for everyone. It is a personal choice for you and yours.

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The 4% rule is about how much you can “safely” withdraw from a balanced portfolio. Many people (almost the entire Bogleheads board, Hocus, author of the article) think the 4% rule is too aggressive and prefer lower WRs. Perfectly valid point of view, IMO.

But IMO it is unnecessarily complicated to play these mental games where you withdraw 4% and then immediately put 1% back into savings. Just withdraw 3%. But be cognizant that this strategy means you will need to either work extra years before retirement or have a lower standard of living.

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And keep in mind 4% is not cast in concrete. It is only a guide to what is required to consider retiring. Personally I waited to double my 4% number in the midst of the dot com boom. I was glad I did. The dot com bust soon followed.

A safety margin is always a good idea. Those who do the calculations to four decimal places and believe its an absolute value are probably over doing it.