What’s popular isn’t always right.
Chances are, if you’ve studied personal finance for any length of time, you’ve come across the 10/10/80 budget allocation method. But is it the best for you?
The 10/10/80 method teaches that people should give 10% of their income, save or invest another 10%, and spend the rest – 80%. It is often advertised as a universally-viable method of handling your finances.
And the thing is, it sounds good, doesn’t it? That means it must be, right?
While the 10/10/80 method correctly splits personal finance into three major categories (giving, saving, and spending), it inappropriately assumes that people should only give 10% of their income. Similarly, it assumes people should only save or invest 10% – as well as that they should start saving up to 10% right away.