The 10 Percent Rule Can Help You Finally Make—and Stick to—A Budget

published Dec 28, 2020
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When’s the last time you took a good, hard look at your finances? I don’t just mean checking your checking account balance from time to time—though that’s certainly important—but really assessing your spending habits? Whether you’re trying to create or maintain a budget, going through your daily expenses can dredge up a lot of feelings, including a sense that you don’t even know where to start.

It’s not realistic to think you can wake up one day and completely do without expenses you might have taken for granted, such as your morning latte habit (which, for the record, is not hurting your bottom line the way some financial experts swear it is). The more drastic a lifestyle change is, the less likely you will be able to keep it up long term, and if you want to hit some steep financial goals in the coming year, consistency is key. Instead, Jen Smith, the creator of Modern Frugality, suggests using a “10 percent” rule to slowly adjust your habits overall.

What is the 10 percent rule, and how does it work?

“I always say just have the goal of getting 10 percent better every month,” she tells Apartment Therapy. She suggests starting by taking an honest inventory of your monthly spending—and resist the urge to edit your shopping habits entirely.

“Just look at the numbers and try to get 10 percent better: 10 percent less spending online, [or] at Starbucks… look at the things that you’re like, ‘I wish I didn’t spend as much there’ and just get 10 percent better,” she suggests. In other words, that might look like buying takeout once a week rather than every few days, or brewing coffee at home every tenth day if you can. Smith recommends using an app that forces you to log your purchases, rather than one that categorizes them for you, if you need to practice keeping track of exactly where your money is going as the month goes on.

You can also use the 10 percent rule to foster habits that help you grow your money, not only to become a better budgeter. “Look at all the places you want to be putting more money toward, like your IRA, emergency fund,” or a savings account for your child’s college tuition, Smith suggests. Whether you want to siphon the 10 percent you used to spend elsewhere toward these goals, or commit to saving 10 percent more each month than you previously would, those small additions can quickly snowball.

The overall aim isn’t necessarily to get 100 percent better by month 10, but to slowly adjust your habits so that you stick with them. As Smith points out, a lot of people abandon a vague New Year’s Resolution to “save money” by February, “but if you look at it as a journey to getting there through December, starting small up front can be a little bit more manageable.” The point, she adds, is to develop “compounding growth” in your habits and your finances simultaneously, so that trimming your budget when and where you need to suddenly won’t feel so scary anymore.

Additional reporting by Kara Nesvig.