Saving for the Ultimate Barkada Trip: The 70-20-10 Rule Explained

As you learn more about personal finance, you’ll see that there are many ways to budget your money, and the better you get it, the more financial tools like credit cards and loans become available for you in the future. But for those just starting out, one of the simplest, most straightforward, and therefore most achievable budgeting strategies is the 70-20-10 Savings Rule.

In this quick guide, we explain the best way to save money for vacation and go through how the 70-20-10 strategy can work for you to help you achieve goals like going all out on your barkada’s first out-of-thecountry trip.

What is the 70-20-10 Savings Rule?

The 70-20-10 savings rule is a straightforward guideline that suggests dividing your income into three categories:

1. 70% for Living Expenses: Allocate 70% of your income toward essential expenses, such as groceries, transportation, and other bills. This category covers your day-to-day needs — and wants — and ensures you have a comfortable lifestyle.
2. 20% for Savings: Reserve 20% of your income for savings. It’s crucial to build an emergency fund to cover unexpected expenses. This is also your savings for major milestones like a down payment for a car, or pursuing further education.
3. 10% for Future Planning and Investments: Dedicate 10% of your income to future planning and investments. This category focuses on long-term financial goals, including retirement savings, investments, and building wealth. Starting early can provide you with a substantial edge as the power of compounding has the potential to deliver remarkable results over time.

You can look into beginner-friendly investment tools like Earnest, which gives you access to everything you need to know about investing in Unit Investment Trust Funds (UITFs), and lets you start investing in a great selection of UITFs with just PHP 1,000.

How do you start applying the 70-20-10 Savings Rule?

To effectively implement the 70-20-10 savings rule, follow these steps:

1. Track Your Expenses: Start by understanding where your money is going. Track your expenses for a few months to get a clear picture of your spending habits and identify areas where you can cut back or make adjustments.
2. Create a Budget: Based on your tracked expenses, create a realistic budget that aligns with the 70-20-10 rule. You can further break each category down. For example, assuming your take-home (after taxes) monthly income is PHP20,000. The 70% for expenses can be split into your budget for food, bills, clothing, transportation, and other day-to-day needs.

This way, you can monitor your budget better, and plan your expenses better — like instead of spending your clothing budget every month, you can just save it and roll it over to the next month when your favorite brand has a mid-year sale and you can get more bang for your buck. 

As for your savings, you can also break it down further into, say, putting half into your emergency fund, and the other half for a more short-term goal, like that barkada trip!

1. Automate Your Savings and Investments: Set up automatic transfers to move your savings and investments portion directly into separate accounts. The great thing is, you can do this for both your savings and investments. Automating this process ensures you consistently save without relying on willpower alone.
2. Reduce Unnecessary Expenses: Look for ways to reduce discretionary expenses. Small changes like cooking at home, canceling unused subscriptions, or opting for affordable entertainment options can help you free up extra money for savings and investments.
3. Regularly Review and Adjust: Periodically review your budget to ensure it still aligns with your financial goals. As your income increases or circumstances change, consider adjusting the percentages allocated to each category.

How to save money for a trip using the 70-20-10 strategy?

Now that you understand how the 70-20-10 strategy works and know how to begin applying it to your own budget, you can start making the necessary adjustments that you’ll need to make that barkada trip possible.

1. Set a budget for your trip and then plan your attack: It’s important to set a budget for your trip — how much you’ll spend plus contingencies. See how much you need to save per month before the trip. For example, if your goal is to have PHP 30,000 in four months, you need to save PHP 7,500 every month. Track your expenses and savings and then plan your budget accordingly. Be realistic about what you can cut down on. It can be your food budget by cooking your own meal, pause entertainment subscriptions, and 50% of your savings. Then your budget will now look something like this:
2. Track your expenses: Staying on budget can be more manageable if you track your expenses. This way, you can be aware of how much money you still have and avoid going over the budget. Track your expenses on a notebook, an excel file, or on your phone.
3. Separate your savings account: Set up a separate savings account where you can keep your savings. You could arrange automated bank transfer, so you don’t forget to set aside some savings. This tip for saving money for vacation can also help you avoid touching your savings for impulsive buys. This way, you can achieve your goal in no time.
4. Go on a no-spending challenge: Avoid any unnecessary expenses by doing a no-spending challenge. Don’t buy anything that is not an essential. By doing this challenge until your trip, you can save more money.
5. Pick up a side hustle: If you feel that the goal is too much, consider supplementing your income with a side hustle. Put in your earnings to your savings.

Start saving for your next barkada vacation!

By understanding how to save money for travel using strategies like the 70-20-10 rule work, you can feel more empowered to move your budget around without sacrificing your savings and investment for the future. This way, you can enjoy traveling while still making smart financial choices.

Remember that when it comes to having a good grasp of your finances, starting early will give you a significant advantage. Learn more about saving, investing, and managing your personal finances here.