Weekend Reading – How does the 30-30-30-10 budgeting rule work?

Weekend Reading – How does the 30-30-30-10 budgeting rule work?

Hey Everyone,

Welcome to a fresh Weekend Reading edition, highlighting how the 30-30-30-10 budgeting rule of thumb works and whether this framework could ever work for you…

Before that highlight and other rules enclosed for personal finance consideration, check out these recent reads:

When should you sell your stocks?

When is debt avalanche or debt snowball a better payment method for you?

Will the TSX turnaround in 2024?

What is the 30-30-30-10 budgeting rule?

A newsfeed caught my eye a while back….something to the effect of: should you be using this rule to help you with your personal finance budgeting?

Not a bad idea. 

Let’s start with asset accumulation using this rule. 

Most financial experts and savvy DIY investors would likely agree you should have some sort of budget in place or at least know where your money is coming from and going to.

The 30-30-30-10 is a percentage-based budget that suggests you spend certain percentages on certain spending categories…structure is helpful to help change many behaviours in our lives (e.g., exercise, diet, golf swings, other). It is structured as follows:

  • 30% of your budget is for housing (rent or mortgage).
  • 30% of your budget is for other necessary expenses such as groceries, housing utilities, gas/transportation, etc. 
  • The other 30% of your budget is set aside for paying off debt and/or saving and/or investing.
  • The final 10% of your budget is for wants and fun money like travel. 

Now, first of all, these are just suggestions. You can certainly make some adjustments. This includes the 30% allocation to paying off debt and/or saving for retirement since unless you’ve been living under a rock, this rigid budgeting method just won’t work for higher cost of living cities where GenY and younger generations are striving for home ownership. 

Second, 10% on living your life might seem pretty darn low. 🙂

I’ve also read that this rule could apply to asset decumulation as well. 

The income planning version of this rule could look like this:

  • 30% of your portfolio in bonds/fixed income.
  • 30% of your portfolio is related to property (i.e., paid off primary home and/or REITs).
  • The other 30% of your portfolio is in stocks for long-term growth. 
  • The final 10% of your portfolio is in cash or cash equivalents.

Using these retirement planning guidelines, you can see there is diversification – spreading your assets across a variety of assets (bonds, real estate, stocks and cash) with the objective to reduce portfolio risk. This includes any near-term spending plan from your portfolio in retirement with the consistent 10% cash wedge to avoid touching equities or other growth assets when they are down in price.

The Cash Wedge – Managing market volatility

Where do I stand on these budgeting rules?

I don’t mind them at all, for a starting point.

I like the simplicity of these rules out of the box to trigger some reflection – see what could work for you.

Here are some other budgeting or income planning rules that might be interesting for you to consider – again – to tailor your own financial path:

  1. Your retirement income might be up to 70% of your working income.
  2. Keep an emergency fund equal to six months’ income/expenses. 
  3. Don’t invest any more than 5% of your portfolio in any one stock or bond fund. 
  4. If you can manage to accumulate 20 times your gross annual income, you could likely retire comfortably.
  5. In retirement, you can likely use the “4% rule” as starting point for retirement spending. 
  6. Total home ownership costs (rent or mortgage) should not exceed 30% of your net income. 
  7. Avoid starting full-on retirement until all debt is gone (no mortgage, no outstanding LOC, no car loan;  nada).

What is not on this list is anything close to a 8% retirement withdrawal rate.

No way, Dave Ramsey. 🙂

Weekend Reading – 8% retirement withdrawal rules? No thanks.

Any simple heuristics you’ve used over the years when it comes to personal finance rules of thumb?

More Weekend Reading…

Congrats to all Tourmaline Oil shareholders (myself included). From $TOU this week:

“In addition to the announced special dividend of $0.50/share payable on May 16, 2024 to shareholders of record at the close of business on May 9, 2024, the Company’s Board of Directors has approved an increase to the quarterly base dividend effective Q2 2024 to $0.32/share ($1.28/share on an annualized basis), representing an increase of 7% over the previous quarterly base dividend. The increased base dividend reflects the ongoing financial strength and profitability of the Company. The quarterly dividend is expected to be declared in early June and payable on June 28, 2024, to shareholders of record at the close of business on June 14, 2024. The special dividend is, and the quarterly base dividend will be, designated as an eligible dividend for Canadian income tax purposes.”

Nelson Smith has a take on the recent capital gains announcement: dividend investing just got more powerful.

“By making taxes much higher for certain investors, the federal government has inadvertently made dividend investing all the more attractive.

This should entice thousands of investors to at least consider more dividend stock exposure in their portfolio. The small tax penalty of getting paid today now looks pretty attractive versus a potentially much larger tax penalty in the future.”

Great point shared here about oil and gas and other stock market volatility in general:

Dale also highlighted depending on your investing start date: how much do you need to invest to become a millionaire (…which can be less than you think).

I really enjoyed this article below – which is something I try and wrap my own head around with my own retirement income projections. Michael Kitces suggests to reframe risk as part of your retirement spending as “over- and under-spending” for decision-making. 

Reframing Risk In Retirement As “Over- And Under-Spending” To Better Communicate Decisions To Clients, And Finding “Best Guess” Spending Level

“The Monte Carlo success/failure framing, in essence, focuses only on minimizing the risk of overspending, hiding a bias towards underspending by calling it a “success”. Or, put another way, a 100% probability of success is exactly a 100% probability of underspending. Which means that solving for higher probabilities of success generally necessitates underspending to the point where clients, while comfortable knowing that they almost certainly won’t run out of money, may have to significantly revise their desired expectations for their standard of living.”

A great find by my friend Rob Carrick @rcarrick in The Globe and Mail this week – well worth the skim and makes a strong case for U.S. stock market investing and indexing:

U.S. Stock Market Returns – a history from the 1870s to 2023

“Throughout this post we’ll be relying on a fantastic data set released and maintained by Professor Robert Shiller, giving us data on U.S. stock market returns all the way back to the 1870s — a data set covering more than 150 years.”

For portfolio growth but also for some defensive stability, my friends at Stocktrades shared their top Canadian industrial stocks recently. I happen to own a few stocks in that list for the same reasons they wrote about. 

I’m down to a handful of U.S. stocks in my/our portfolio now, I’ve sold most off over the years, however I continue to own the likes of BLK, BRK.B, WM and a few others. That’s it. I certainly don’t invest in Peloton stock directly and never have, although I guess I do own it indirectly if I own a global ETF like XAW.

Too funny from Genevieve this week! 

Last but not least, passionate DIY investor Henry Mah has a few tips for those with RRSPs/RRIFs – including getting rid of those assets/spending those assets to enjoy before your 80s. 

“What we should have done, at least in my opinion, was to stop adding to our RRSPs once we knew our investment income met, or exceeded our retirement needs. Any money we had to invest should have gone into our TFSAs and non-registered accounts. Rather than withdrawing our investment income to cover expenses, we should have started withdrawing RRSP funds to cover expenses, provided we kept our total taxable percentage below 28%. We should have also delayed CPP and OAS till age 70. If we had withdrew more RRSP funds than we needed, we could have gifted some of those funds rather than depositing them into our non-registered.”

Save, Invest, Prosper!

As always, check my Deals page – partnerships and discounts to help you make the most out of your money – some of them you can’t find anywhere else!

Check out my partnerships with:

  • Dividend Stocks Rock (including my deep lifetime discount from Mike!)
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  • StockTrades.ca
  • LegalWills
  • Borrowell 
  • and more!

As always, you can also consider reaching out here for some low-cost financial projections services – anytime.

Cashflows & Portfolios

I launched this service with my DIY investor good friend – a service founded by DIY investors for DIY investors without the conflict of any advice, without costly fees (like some folks charge), while offering money-back guarantees because we’d expect that as DIY folks ourselves…

In fact, there are now two (2) low-cost services to choose from:

  • Done-For-You – we do the work and data entry, and provide your reports OR 
  • DIY – whereby you do all the work, you do your own data entries, and you get your own results in the software – we essentially open up some professional financial software for you to use to be your own retirement income planner!

As a My Own Advisor reader, you always get a discount off either service. Just mention my site. That’s it.  

Enjoy your weekend. 🙂


My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

12 Responses to "Weekend Reading – How does the 30-30-30-10 budgeting rule work?"

  1. Lloyd (63, retired at 55) · Edit

    “Any simple heuristics you’ve used over the years when it comes to personal finance rules of thumb?”

    Thank Dog for Google. 😉

  2. “Rather than withdrawing our investment income to cover expenses, we should have started withdrawing RRSP funds to cover expenses, provided we kept our total taxable percentage below 28%.”

    We did a litle of that, but target was 35% and we couldn’t draw much. If you don’t draw investment income from taxable accounts, you still have to pay tax on that income. If you choose growth over income, then you are at risk of markets. If you follow above, you also have to pay tax now rather than much later on the RRSP/RRIF withdrawal. Seems like a plan CRA would be happy with? TFSA contributions are important. The allowable amounts are not large. If you invest the max into relatively safe securities and don’t withdraw, there should be more than enough to cover end of life taxes on RRIF withdrawals. I realise that every person’s situation is different.

    “If you can manage to accumulate 20 times your gross annual income, you could likely retire comfortably.”

    So, take a couple both working. One earning $100k, the other $60k for total of $160k – They would need 20x or $3.2million?? Even one person earning $100k would need $2million?? Those numbers are way higher than what most would advise, and more than what would actually be needed. Or maybe I have a different idea of what “comfortably” means 🙂

    Safe Withdrawal rate – 4%? OK as a pre-retirement planning number. Over past 20 years, our’s has averaged about 3.5%. For those with a long term retirement horizon, I would ignore those Monte-Carlo predictions. You don’t want to die broke. Try and draw just what you need and maintain or grow your capital using a good allocation in dividends and fixed income(when attractive as, for example, now) You will be living on the yield on your capital for a long time. Do you want to deplete your capital, (except in your last few years) and be at risk of market declines just when you need the money?

    Retirement is not a time to take risks and assume markets will perform as they have in recent past. Don’t ignore fixed income. Take OAS and CPP at 65 unless you are certain how long you will live 😉

      1. x20 is pretty large but potentially not far off as a rule of thumb.

        1. If you want to spend $100k you need $2M.
        2. If you want to spend $80k you need $1.6M.
        3. If you want to spend $60k you need $1.2M.

        8% withdrawal rate is WAY too high for me to start out retirement with. I will be targeting 4-5% from my RRSP initially.

        1. If you have CPP/OAS at 65, that will provide at least $30k for a couple. Then you need another $70k if you really want to spend $100k. At 4% SWR, 1.75M (which coincidentally happens to be about where a recent survey came out!) https://www.newswire.ca/news-releases/bmo-annual-retirement-survey-millennials-believe-they-need-about-2-1m-to-retire-compared-to-the-national-average-of-about-1-7m-883841889.html

          Those guides should perhaps be reversed. For example: If your nest egg is not likely to be more than $1.2L, then adjust lifestyle to not spend more than $60k 😉 Those are presumably before tax numbers.

          1. Very fair, assuming both have lived and worked in Canada most of their lives re: CPP and OAS x2 income streams.

            $2M personal portfolio beyond CPP and OAS is very good savings/investing for any couple I believe.


    1. Ya, that x20 gross income rule of thumb is likely a tad high but probably pretty close for any starting point with some buffer already built in re: $100k spend = $2M nest egg required. Some Canadians will get there with that portfolio value + pensions but most won’t and may not be needed of course depending on what folks spend…

      TFSA contributions are VERY important. 100%.

      Our goal is to eventually transfer risk…use of pensions, gov’t benefits and CPP and OAS as we age.

      That’s the thinking for now!

  3. Thank you for this. I suggest that one add, even a small % for charitable donations. The need is greater, giving is down as a % of population and it helps us remember that we are part of a larger community, even in divisive (hopefully temporary) times.

    1. Totally agree! Helping others and contributing to the society make our life more meaningful. Besides, the more you give, the more you will receive!


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