I’ve been looking at different ways to budget money to pay off obligations, save, invest, and still have fun.

For a looong time, it was a struggle. It always seemed like, after paying everything, I had very little to none left for savings. That’s really, really frustrating especially if you’ve been working your ass off.

But I kept looking for tips. And as they say, when you ask, the answers come.

So below I’m sharing some budgeting rules/equations that have been helping me organize my personal finance one step at a time.

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4 Budgeting Rules/Equations for Personal Finance

1. Expenses = Income-Savings

This was the very first equation I learned. It was during a microfinance class in college. If I remember it correctly, we were asked how the poor can save.

But even if you’re not exactly poor, if you’re starting out or starting over, this is the most basic formula.

Based on this equation, you don’t save what’s left after spending. You spend what’s left after you save.

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At first, it can be very challenging to say no to yourself and others so you can set money aside. You’ll have to get really creative too, so you can still have fun without touching your savings.

2. 5-15-20-60 Rule (Vince Rapisura)

I came across the 5-15-20-60 rule from Vince Rapisura‘s book (L)earning Wealth: Successful Strategies in Money Management.

Here’s how to allocate your income (based on your gross salary):

• 5% Insurance
• 15% Savings
• 20% Debt payments or investments
• 60% Expenses

Let’s break it down further.

• 5% for insurance: In his book, Sir Vince wrote: “This is because you have to protect your most valuable asset–you!” He further discussed different insurance types in Part 11 (Insurance 101).
• 15% savings: This is for your emergency fund. And Sir Vince defines an emergency as a “life-or-death” situation. So you can’t use it to fund an out-of-the-blue trip or dinner with friends or buy a new cell when yours broke down. Haist.
• 20% for debt payment or investment: Sir Vince’s advice is to keep debt payments within 20% of your income. “If you pay more than that, you may be borrowing more than your debt capacity.” You can also use this amount for passive income vehicles such as dividends, rental income, etc. He discusses these investment vehicles in Part 13 of the book, where you’ll also find a table on passive income and tax rates.

3. 10-20-5-5-5-50 Rule (Bo Sanchez)

Bo Sanchez, in his book How Good People Like You Can Become Rich, talks about becoming a seven-jar person. So as soon as you receive your money, divide it into seven: 10-20-5-5-5-50.

• 10% Tithes
• 20% Emancipation fund
• 5% Emergency Fund
• 5% Empower Fund
• 5% Enjoyment Fund
• 5% Education Fund
• 50% Everday Fund

Let’s dig a little deeper.

• 10% Tithes: As Bo Sanchez explained, this goes to our first business partner: God.
• 20% Emancipation Fund: Some refer to this as retirement fund or financial freedom fund. It’s intention is to help you reach a point where you can stop working and maintain your current lifestyle, i.e., be financially free. This is the fund you use to invest or to put up your business. Then, you don’t touch this fund and reallocate it for something else.
• 5% Emergency Fund: Bo recommends setting aside 3-6 months’ worth of your salary, which you can use for emergency home repairs, hospital bills, and other unexpected costs. He also adds: “The older you get, the bigger your Emergency Fund should be.”
• 5% Empower Fund: This is your savings for things you really want–a new gadget, a car, college fund for your children.
• 5% Enjoyment Fund: This is the portion you can enjoy. Splurge and have fun! As Bo Sanchez wrote: “Rewarding yourself regularly is a fantastic motivation to earn more. And it also keeps the economy moving.”
• 5% Education Fund: Invest this in yourself. Enrol in courses, hone your skills–use this jar to increase your value in the job market or up your business earnings.
• 50% Everyday Fund: This covers necessities, bills, and other daily expenses.

4. 100-10-20-70 Rule (Bo Sanchez)

If you find the third formula a bit overwhelming, try this simple equation from Bo Sanchez’s The Abundance Formula.

• 100% Earn as much as you can
• 10% Tithes
• 20% Investments
• 70% Expenses

• Make 100%: The book’s first section talks about earning as much as you can by improving your competence, your wealth consciousness/mindset, and your character. And admittedly, this is the part I and many others continue to struggle with. Many of us are wrestling with invisible barriers or internal/subconscious beliefs that say something like: “I can only earn X” or “My work is only worth Y.”

Frustrating but true. Sadly, if you see your worth as sooo little, or consider it okay for others to undervalue your work, time, and skills, you’ll forever be struggling for money.

It hurts to almost beg for a raise and it’s painful to be remembered only when someone wants cheap (or free) labor for a ton of work.

Or maybe it’s high time you learn how to negotiate rates, but that’s a topic for another post.

Of all the personal financial mistakes I’ve made, this is the one I hope you don’t go through… and if you’re in it, I hope you learn quickly and find better opportunities or arrangements. They do exist. You just have to keep looking & learning while continuously improving your skills.

Constantly undermining your worth will cost you your life, your health, your relationships.

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And even worse, if you or someone you love gets sick (or both), you’ll suffer the consequences of your own lack of financial standards and boundaries. I’m not trying to scare you. I’m just being realistic.

If you want to understand this concept more–and how it actually permeates every aspect of your life–read the article Have you hit an income ceiling? by Jane Rapin, or watch these powerful Marie Forleo videos: Do You Feel Guilty About Making Money? and Know Your Worth: The Secret to Getting Paid & Overcoming Shame.

Then find people who are comfortable with money, help you grow your financial IQ, and value your contribution. Being around such people will help you break free from your limiting beliefs about your earning capacity and your worth.

The other fun thing about increasing your income is that the more you earn, the more you’re able to share. And honestly, the smile you see when you give to others wholeheartedly… it’s priceless.

• 10% tithes: As mentioned above, this is the portion we give back to our best business partner: God, the Universe, a Higher Being, whatever you may believe in. The other benefit of sharing what you have is that it puts you in an abundance mindset. To quote Bo: “Tithing is a declaration of abundance. You believe that God’s blessings will flow back to you.”

• Grow your 20%: This is the amount you invest so your wealth continues to grow, plus it’s your preparation for retirement. “Invest in the future before you invest in the present.” You can find a similar lesson in the classic book The Richest Man in Babylon.

• Manage your 70%: Many of us don’t need help spending what we earn. 🙂 We definitely should be enjoying the fruits of our work. But Bo reminds us that we must continue to keep our expenses in check even as we grow our income:

“Here’s the law for getting wealth: As your blessings grow, your spendings should grow in a slower way. Do that and you’ll be rich.” – Bo Sanchez

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Why are there four budgeting formulas/rules here? To give you options. I am yet to find a formula that matched my exact situation or needs. And frankly, at first, jumping from saving 0% to 20% to build an emergency fund was TOO MUCH for me.

So find a formula that works best for you. Adjust it if that’s going to help you form a habit of saving, investing, and paying off debts. For example, instead of saving 20% outright, start saving 5%. Gradually increase this amount as you simplify your lifestyle or finish dealing with health emergencies.

BUT let me just say this. If you find these formulas difficult to apply at first, that is totally fine. I struggled a lot too (I still do) and made soooo many mistakes (I still make them). It will require discipline, new habits (including negotiation skills and setting boundaries), delayed gratification, and saying no–to yourself and to people you love–and that may break your heart.

Keep at it. When you stumble, just start over and do better and be wiser. Forgive yourself every single time. And forgive those who don’t understand your new financial habits and why you got to do what you got to do.