The 60 Percent Solution
Simple budgeting
The 60 Percent Solution is a budgeting framework that allocates 60% of gross income towards basic expenses, with the remaining 40% split into four categories: retirement savings, long-term savings, short-term savings, and fun money. This framework is designed to be simple and easy to follow, making it accessible to young adults with variable income. However, it may not be suitable for those with complex financial situations, such as multiple sources of income or high levels of debt.
- Allocate 60% of gross income towards basic expenses
- Split the remaining 40% into four categories: retirement savings, long-term savings, short-term savings, and fun money
- Prioritize needs over wants
- Calculate basic expensesDetermine the total amount of basic expenses, including rent, utilities, and food.Pro tipUse the 50/30/20 rule as a guidelineWarningUnderestimating basic expenses can lead to financial stress
- Allocate 60% of gross incomeAllocate 60% of gross income towards basic expensesPro tipUse a budgeting app to track expensesWarningFailing to allocate enough for basic expenses can lead to debt
- Split the remaining 40%Split the remaining 40% into four categories: retirement savings, long-term savings, short-term savings, and fun moneyPro tipUse a separate account for each categoryWarningFailing to prioritize retirement savings can lead to financial insecurity in the future
- Review and adjustRegularly review and adjust the budget to ensure it is working effectivelyPro tipUse a budgeting app to track expenses and stay on top of financesWarningFailing to review and adjust the budget can lead to financial stress
John, a 25-year-old marketing specialist, uses the 60 Percent Solution to manage his finances. He allocates 60% of his gross income towards basic expenses, including rent, utilities, and food. He then splits the remaining 40% into four categories: retirement savings, long-term savings, short-term savings, and fun money.
Emily, a 30-year-old entrepreneur, uses the 60 Percent Solution to manage her finances. She allocates 60% of her gross income towards basic expenses, including rent, utilities, and food. She then splits the remaining 40% into four categories: retirement savings, long-term savings, short-term savings, and fun money.
The 60 Percent Solution was first introduced by Richard Jenkins, the former editor-in-chief of MSN Money, as a way to simplify budgeting and make it more manageable for young adults. The framework has since been popularized by Ramit Sethi in his book 'I Will Teach You to Be Rich'.