The family budget, given the current state of our economy, is a popular subject of conversation in many households today. Most people dread the headache of preparing a budget because it can be a time consuming and daunting task. Applying The 60% Solution will help you save time and money!
The object of “The 60% Solution” is to fit your regular monthly expenses within 60% of your gross income. By doing this, you make room for savings, retirement and spending money which are the items most often neglected as most people do not plan for them. Some of the percentages may vary; however, here is a rough guideline:
60 percent: Monthly expenses. This includes housing, food, utilities, insurance, Internet, transportation, etc. These items most commonly represent a budget.
10 percent: Retirement. If you are following the basic rule of retirement, this amount is already being deducted from your paycheck for a 401(k) investment.
10 percent: Long-term savings or debt reduction. This money is best invested in something such as stocks or an index fund and this can serve as your emergency fund. If you are in debt, not including your mortgage, this portion of your budget would be best applied to said debt. You also might want to draw from other categories, such as retirement, to pay towards your debt. Once you have paid off your debt(s) you can resume contributing to your long-term savings and retirement.
10 percent: Short-term savings. This money is for the occasional unexpected expense, such as automobile repairs, home maintenance, etc. Make sure that you only spend this money when you need it.
10 percent: Fun money. This money is for eating out, watching movies, shopping, etc.