Budgeting and the 60% Solution

by Andy Hough on August 29, 2007

The 60% solution is a budgeting method I’ve seen mentioned on a couple of blogs. The basic concept is to limit your committed expenses to 60% or less of your total income.  Then commit 10% each to retirement savings, long-term savings, short-term savings for irregular expenses, and fun money.  Looking at my budget for last month my committed expenses are quite easily under the 60% limit.  I don’t actually follow the 10% guidelines for what to do with the rest of my money but as the article indicates once you have your committed expenses at 60% it is simple to save money.

Since I have a lot of debt to repay I don’t think the 10% guidelines work too well for me.  Right now I just put as much extra money as I can towards debt.  Since I’m frugal I don’t worry that I’ll waste my money without specific guidelines on where to spend it.  I use Pear Budget to do my budget and it works fine for my simple needs.  I use it more as a way to track my income and expenses than as an actual budget.

1 Steve September 10, 2007 at 2:07 pm

We use the 60% Solution budget. I view the numbers more as guidelines or goals to strive for. We’re not at 60/10/10/10/10 nor do I ever expect to be there exactly but I do like the general categories. It’s the perfect budget for people that don’t like the strictness of a budget as far as I’m concerned.

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