Recs

16

The 60% Solution

There are no hard-and-fast rules to budgeting except one: Spend less money than you make.

But say you want to fine-tune your plan without much heavy lifting, long division, or hours poring over Quicken spreadsheets. A personal favorite on budgeting is The 60% Solution proposed by author Richard Jenkins. He suggests that 60% of your income should go to "committed expenses" (mortgage, food, car payments, utilities, etc.), 10% used for "fun money," another 10% for irregular expenses (your short-term savings), 10% for retirement savings, and 10% for long-term saving and/or debt reduction.

Consider this a starting point for your own budget, and modify the 10% chunks for your lifestyle. If you have no debt, consider socking away 25% of each paycheck for retirement savings and use a little bit more for "fun money." Bend the rules to fit your own situation.

If there's a significant other in the spending picture, avoid playing killjoy by bringing them into the money conversation early. Sit down together and start talking about some of your near-term and long-term goals. Retire early? Build a screened-in porch for the house? New schnozzles for the whole family? Then take a stab at figuring out what it would cost to achieve those things. You'll be surprised to see how cutting back a little now can turn into a big payoff in the future.

Staving short-term but costly treats will require discipline and constantly reminding yourselves of those things you are working towards. Make it a game and see how much you can "save" one weekend by not shopping. Set up a separate account (and hands off!) for that dough. Lather, rinse, and repeat on a weekly basis.


Read/Post Comments (0) | Recommend This Article (16)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 506349, ~/Articles/ArticleHandler.aspx, 7/22/2014 10:06:30 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dayana Yochim
TMFSchool

Today's Market

updated 50 minutes ago Sponsored by:
DOW 17,113.54 61.81 0.36%
S&P 500 1,983.53 9.90 0.50%
NASD 4,456.02 31.31 0.71%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes


Advertisement