The 10/20 Rule-Debt Management in the New Economy

The 10/20 Rule-Debt Management in the New Economy

We like to believe that we have a handle on our finances, but the truth is that most of us are living beyond our means. People tend to love themselves some financial freedom, so they sometimes spend way beyond their means. As more and more debt piles up, it can seem like you will never get out, but the good news is that there is a way to turn this around.

[Read More: Lending Money – Trending Finance Topics]

The 10/20 Rule is a guideline that is essential in your financial practice. It will help you to become more financially disciplined and help manage the pressure of compulsive spending.

The 10/20 Rule of Thumb?

Understandably, you may be frustrated by your mounting debt. The 20/10 rule is a guideline to take comfort when it feels like no end is in sight. When making financial choices, spend no more than 20% of your annual income on interest-bearing debt like credit cards and student loans. The 10% represents the monthly amount you can spend towards interest on the debt.

There is no long-term benefit to choosing debt over savings, and there are a lot of consequences that come with not controlling your spending habits. So, here are some ways that the 10/20 rule can help you in your money management regimen:

1. Prioritize Spending

The 10/20 rule will make you think about spending habits differently. Consider what is essential for you to spend your money on, and set up a budget based on that. One of the best ways to do this is to create a monthly budget that includes only those items that are important to you. If you have student and credit card debt, you should priorities paying those off above all other expenses.

2. Strive for the 10%

The second item on your monthly list will be the 10%. It is what you can spend on other debt, vacations or whatever else you want to spend your money on. You will have to keep a close eye on your spending in this category, which is why it’s helpful to set up a budget. Using envelopes is another excellent way to stay on track with what you can spend!

3. Save The Rest of Your Income

The third part of the 10/20 rule is to make sure that you are saving at least 20% of your income. Put some money away for savings and savings alone; after all, other priorities have been met. Staying on track with this rule will help you from having to make hard and fast choices about your finances later on. Even if you have to get a 2nd job or cut back in other areas, this is the way to go.

[Read More: Lending Money – Trending Credit Cards Topics]

How You Can Get Started

You can start to practice the 10/20 rule with your finances by taking a look at your spending habits. Is there room for improvement? If so, take a look at how you can whittle down your expenses and make room for savings.

How You Can Get Started

The key to success with the 10/20 rule is being realistic and sticking to it over time. Even if you miss a month here or there, the important thing is that you are working towards the big picture. Your goal should be to get all your interest-bearing debt paid off within a year and continue using the 10/20 rule to make intelligent and thoughtful financial decisions.

What Are The 10/20 Rule Pros and Cons?

The benefits of this rule are clear. If you can use it to help you get out of debt, it can provide a real sense of freedom. If you are having trouble managing your finances, this rule can help you to start making those necessary changes.

The disadvantage is the fact that the 10/20 rule is a bit daunting. If you want to get out of debt and stay out of it, you may have to make sacrifices along the way. It means you must give up luxury purchases to pay off your interest-bearing debt on time. No matter what your lifestyle is like, there will always be some sacrifice involved in getting out of debt.

Is This rule Realistic?

Yes, the 10/20 rule is realistic for most people. As long as you have the right attitude and prioritize getting out of debt, it will be realistic. Using the 10/20 rule is not just about paying off debt, but it’s also about making wise financial decisions every day. To do this, you will have to put in the time and effort that is necessary to ensure that your finances are healthy and growing.

When it comes to the 10/20 rule, you should use it as a guidepost to financial discipline. Making sound financial choices is not something you can skip over; you should always look for ways to improve your situation.

Is The 10/20 Rule for You?

The main thing when it comes to the 10/20 rule is that you have to be on board with the idea. Remember, this is a procedure you will be sticking with for the long haul, and it’s a good idea to be ready for all the changes that may come with it. It will not work if you are not confident about your ability to make sound financial decisions.

Many credits card companies and financial institutes offer free budgeting tools for their customers. You can always use one of these tools to start practicing this rule. Or, you can download some helpful budgeting software that you may use to track your spending.


Understanding the 10/20 rule and using it in your financial decisions is essential. Managing your finances should be a top priority, so take this rule and implement it as early as possible. If you want to make sure that you are making smart choices with your money, then making peace with the 10/20 rule is essential. There is no reason for us to live beyond our means, so use this guideline whenever you make financial choices in the future.

If you want more money tips...

Join us and stay up to date on all current offers and tips!

By clicking on ‘SIGN ME UP’, you agree to our Terms of Use & Privacy Policy

Other Posts You May Enjoy:

What is a hard money lender?

Are you a student looking for the perfect credit card option? The Stanford Federal Credit Union Student Visa Credit Card has all of your needs