70/20/10 Budget Calculator

Formula

The formula to calculate the distribution of funds is:

\[ \text{Essential} = \text{Total} \times 0.70 \]

\[ \text{Investments} = \text{Total} \times 0.20 \]

\[ \text{Leisure} = \text{Total} \times 0.10 \]

Where:

$\text{Essential}$ is the amount allocated for essential expenses ($)
$\text{Investments}$ is the amount allocated for investments ($)
$\text{Leisure}$ is the amount allocated for leisure activities ($)
$\text{Total}$ is the total amount of income or budget ($)

What is 70/20/10?

The 70/20/10 model is a budgeting guideline that suggests distributing your income or budget in the following proportions: 70% for essential expenses, 20% for investments, and 10% for leisure activities. This model helps ensure that the majority of your income covers necessary living costs, a significant portion is saved or invested for future needs, and a smaller portion is reserved for discretionary spending.

Example Calculation

Let's assume the following value:

Total Income or Budget = $5000

Using the formula to calculate the distribution:

\[ \text{Essential} = 5000 \times 0.70 = 3500 \text{ dollars} \] \[ \text{Investments} = 5000 \times 0.20 = 1000 \text{ dollars} \] \[ \text{Leisure} = 5000 \times 0.10 = 500 \text{ dollars} \]

The distribution is $3500 for essential expenses, $1000 for investments, and $500 for leisure activities.