Before we start
Remember: Millionaires don’t rely on luck—they rely on systems. The 70/20/10 rule is one of the simplest, most effective systems out there.
Managing money is one of the key skills that separates the wealthy from the rest. While it’s easy to assume that millionaires just have more money to throw around, the truth is that most self-made millionaires are exceptionally disciplined with their finances. One tool they often use is the 70/20/10 budget rule.
But what exactly is this budgeting method—and why do wealthy individuals stick to it? Lets see what the 70/20/10 rule is, how it works, and the top five reasons millionaires rely on it to maintain and grow their wealth.
What is the 70/20/10 Budget Rule?
The 70/20/10 budget rule is a simple and effective way to divide your after-tax income into three main categories:
- 70% for living expenses: This includes all day-to-day costs like housing, food, transportation, insurance, and entertainment.
- 20% for savings and investments: This portion is set aside to build long-term wealth, emergency funds, retirement accounts, and other financial goals.
- 10% for giving or donations: This is allocated for charity, community giving, or supporting causes you care about.
This rule is appreciated for its simplicity, flexibility, and effectiveness in building wealth without depriving yourself.
Now that you understand the basics, let’s dive into the five key reasons why many millionaires choose to stick with this budgeting method—even when they don’t necessarily have to.
1. It Builds Financial Discipline
Millionaires understand that money management is more about discipline than income. You can make $500,000 a year and still be broke if you spend recklessly. The 70/20/10 rule forces a structure that promotes intentional spending.
Even though millionaires could easily splurge, many choose to live on 70% (or even less) of their income. They keep their lifestyle in check, which leaves more room for saving, investing, and giving back.
Think of it this way: financial discipline isn’t just about saying “no” to luxuries—it’s about saying “yes” to a long-term strategy. This budget rule becomes a habit that sustains wealth, not just builds it.
2. It Encourages Strategic Investing
The 20% for savings and investments is where the real magic happens.
While many people view savings as a safety net, millionaires see it as a tool for growth. This portion is often used for:
- Stock market investments
- Real estate
- Business ventures
- Retirement accounts
- Building an emergency fund
By setting aside 20% consistently, millionaires ensure their money is always working for them. It’s not just sitting in a bank account—it’s compounding, growing, and creating passive income streams.
The 70/20/10 rule encourages automated wealth-building, and that’s a strategy millionaires love. They don’t just save what’s “left over”; they prioritize it upfront.
3. It Keeps Lifestyle Inflation in Check
One of the sneakiest threats to wealth is lifestyle inflation—the tendency to spend more as you earn more.
Let’s say you get a promotion or your business takes off. It’s tempting to upgrade your house, buy a fancier car, or dine out more. Over time, your spending creeps up, and even a high income can’t keep up.
The 70/20/10 rule acts as a guardrail. No matter how much you make, your spending (the 70%) stays in proportion. If your income doubles, so does your savings and giving—not just your lifestyle.
Millionaires use this structure to ensure they don’t lose control as their wealth grows. It’s not about being cheap—it’s about being smart.
4. It Reinforces Purposeful Giving
The final 10% of the rule is for giving—and for many millionaires, this is non-negotiable.
Wealth, when aligned with purpose, becomes a powerful tool for impact. Whether it’s donating to causes, supporting nonprofits, or helping family and friends, giving reinforces a sense of gratitude and responsibility.
From Warren Buffett to Oprah Winfrey, many high-net-worth individuals see philanthropy as a core part of financial planning. The 70/20/10 budget embeds this mindset into everyday finances—not just big, one-time donations.
Giving also improves your relationship with money. Instead of hoarding wealth out of fear, you treat money as a resource to be shared.
And here’s the secret: Generous people often attract more opportunities, partnerships, and goodwill. In other words, giving isn’t just good karma—it’s good strategy.
5. It Makes Money Management Simple and Scalable
You don’t need a finance degree or an Excel obsession to manage your money like a millionaire. That’s why the 70/20/10 rule is so powerful—it’s simple enough for anyone to use but scalable for any income level.
Millionaires are busy people. They want systems that are repeatable, predictable, and stress-free. With this rule, they don’t have to constantly rethink their spending. The formula does the thinking for them.
As income increases, the percentages stay the same, which means:
- You’re always saving and investing more
- You’re always allocating for generosity
- You’re always living below your means
This consistency makes it easier to track, automate, and optimize your finances without getting overwhelmed.
It’s Not Just for Millionaires
The 70/20/10 rule isn’t just a millionaire’s tool—it’s a mindset. It proves that wealth is less about how much you make and more about how well you manage what you have.
If you’re trying to build wealth, reduce financial stress, or become more intentional with your money, this budgeting rule is a great place to start.
Here’s how you can begin today:
- Calculate your after-tax income
- Allocate 70% to your living expenses
- Set aside 20% for savings and investments
- Commit 10% to giving or causes you care about
Track this for 90 days. Watch how your financial confidence and clarity grow.