Does anyone use the 60/40 Solution?

[Ombud]

That's where 60% of income goes for fixed expenses & 40% is for variable. Fixed = debt, utilities, mortgage etc. Variable = food, clothing, entertaining

[BeenThere...DoneThat...]

...we've followed the 60% Solution for awhile (old MSN article: 10 fun, 10 debt/ST svings, 10 LT savings, 10 irregular)... although there've been times when we've had to tweak it...

[Rocky Mtn Saver]

Based on my numbers, it looks like I use 37% of my income for fixed expense, so maybe I'm doing it opposite?

[BeenThere...DoneThat...]

Jan 9, 2013 18:52:58 GMT -5 Rocky Mtn Saver said:

Based on my numbers, it looks like I use 37% of my income for fixed expense, so maybe I'm doing it opposite?

...not per the article/budget plan I referenced... (not sure about the OP budget, which shows 100% of income allocated for expenses)

[Rocky Mtn Saver]

You're right, it does look a little different than Ombud's method:

www.getrichslowly.org/blog/2006/05/17/budgeting-for-non-budgeters-the-60-solution/

So, based on this article, it's:
60% committed expenses
10% retirement
10% irregular expenses
10% long-term savings/debt
10% fun money

I don't categorize this way, but I'll take a stab at separating items. Mine looks something like this:

48% committed expenses
15% retirement
18% irregular expenses
10% long-term savings
9% fun money

[❤ mollymouser ❤]

What we don't spend goes to savings. Does that count?

[Rocky Mtn Saver]

Jan 9, 2013 18:56:53 GMT -5 BeenThere...DoneThat... said:

...not per the article/budget plan I referenced... (not sure about the OP budget, which shows 100% of income allocated for expenses)

LOL, sadly, this is probably the method that most Americans use!

[Ombud]

Forgot retirement. / savings but I knew this board would correct any errors I made in OP

[BeenThere...DoneThat...]

Jan 9, 2013 19:48:36 GMT -5 Ombud said:

Forgot retirement. / savings but I knew this board would correct any errors I made in OP

...so was "The 60% Solution" by R. Jenkins the budget you were referencing?

[seriousthistime]

I've tried to follow this for a number of years. I am way overweighted in retirement, underweighted in fun. I'll have to crunch the numbers and see where I am now.

[Deleted]

I still use Microsoft Money software and the budgeting portion is set up using the 60/40 solution. My budget is a work in progess lol, but it's a good guideling imo.

[seriousthistime]

Okay.

The ideal is 60% for all committed expenses. 10% for fun. 10% for retirement. 10% short-term savings. 10% for long-term savings.

Here is my actual, in round numbers.

20% into retirement (so basically my long-term savings is going to retirement).
8.5% to short-term savings. This is expected to be used up during the year for irregular, more-or-less predictable expenses.
9% to debt repayment (including car).
The rest is fun and committed expenses. I am trying to watch what I spend on fun. Some things are probably a combination of fun and committed expenses (like the gym, cable t.v., my cell phone, and so on).

Anyway, whatever the numbers come to, I am trying to reduce my living expenses a little here and there so it won't hurt so much when I retire. I think I could be living pretty large if I were not contributing so much to retirement but then I'd be losing sleep at night worrying about it. Even now I worry. I will get SS and a small pension, and if I have about double in my retirement fund than I have right now, I can start to sleep again.

Something I really need to do is figure out where my paycheck is going via a pie chart. Housing is my biggest expense. But what is second biggest, third biggest, and so on ... I'm very good at the latte factor, rarely go out for coffee, but lunch with coworkers is a big expense and one I am trying to reduce (it would help the waistline too). As soon as I figure out those numbers I'll report back.

[Ombud]

It's not pretty but that's why I needed someone to jar my memory

• Utilities inc phone 24%
  
• Housing inc maintenance, tax 16%
  
• Food inc Starbucks 15% [5% Safeway, 10% Starbucks / restaurants]
  
• Car 9%
  
• Insurance 8%
  
• Entertainment 3%
  
• Gifts 2%
  
• Charity 2%
  
• Unknown 21%
  

Not nearly enough to charity

[BeenThere...DoneThat...]

Jan 11, 2013 12:54:42 GMT -5 Ombud said:

It's not pretty but that's why I needed someone to jar my memory

• Utilities inc phone 24%
  
• Housing inc maintenance, tax 16%
  
• Food inc Starbucks 15% [5% Safeway, 10% Starbucks / restaurants]
  
• Car 9%
  
• Insurance 8%
  
• Entertainment 3%
  
• Gifts 2%
  
• Charity 2%
  
• Unknown 21%
  

Not nearly enough to charity

...I'd agree that you could use a little organizing or tweaking here... for example,

...why not combine car/ins./fuel to "Transportation"?
...or organize "Housing" to include home payments/maint./utilities?
...iow, some utilities are more like "Entertainment"?
...and is "Tax" all your taxes? or just property tax?



...just some initial thoughts...

[Ombud]

• fixed 57% (car / housing / insurance)
• food 15%
  
• variable ~~~ entertainment / gifts / charity 7%
• 21%

No matter how I do it, its that 21%

[seriousthistime]

Remember that the 60% solution is based on your gross income, not net. You sort of back into it. Take your gross. Is 10% going to retirement? Long term savings? Short term savings? Fun? The rest is what you get to spend. That way, your taxes, FICA, health insurance and so on are automatically coming out of the 60% without you having to do a lot of calculations.

Now, is the pizza I'm about to have delivered from fun money or the 60%?

Ombud, you're getting too technical for the 60% solution. The idea is that you're not supposed to worry about how you spend that 60% (though you can if you want to). You're just supposed to worry about whether you're saving the 40%, and if you are, the 60% takes care of itself. Your "fixed," "food" and "variable" should all be included in the 60%, unless part of that entertainment and food is "fun," like movies, restaurant meals and drinks with friends, and so forth.

[teachermom]

Ombud....does the 21% include retirement? Savings? You are missing some things on your list.

Teachermom

[Ombud]

Got it. That 21% = WIRS , 10% Starbucks / restaurants. Need another 9% travel outside of the 3k already in WIRS (which is 1 cruise & 1 two day whitewater trip)

[teachermom]

OMbud....wondered if that might be the case as I see you on WIRS. What a relief to know you didn't just blow that 21% and not remember, huh?

Teachermom

[Ombud]

Yep. I've been on emotional overload & doing unusual stuff. Like I applied for & accepted 2 jobs today. 1 part time, 1 full time where they expect over time. Just wanted PT but lost faith in my ability to get work & was offered FT first. They keep writing about how people my age don't get hired so ~~~~~~~

[seriousthistime]

Congratulations on the jobs, Ombud! I hope I am as employable as you when it's time for me to look for another job.

[Ombud]

Slept on it ..... breakfast & lunch thinking it over ...... took part time @ $12 hrs + commission instead of full time @$10 hrs. They'll give me as many hours as I want until May then job will probably go away or at least very part time. Ah well, I want to reinvent myself this year anyway

[haapai]

No, but the article changed my life.  I ran into the article over a decade ago when I was deeply in debt and trying to figure out how I got into that hole and how to prevent myself from ever finding myself in a similar hole again.

The article offered absolutely no short-term solutions but did wake me up to the changes that I would have to make in order to achieve any level of savings or financial security. 

The only committed expense that I could alter was debt repayment, so I spent the next year redirecting everything toward that.  I spent the next three years saving up an EF.  It wasn't fun.  There were no lifestyle upgrades unless you count sleeping better. 

I really didn't want to hear that I needed to start directing 30% of my income toward some form of savings and keep doing that for the rest of my life.  I didn't want to hear that funding an EF seems to be a lifetime thing.  I didn't want to hear that irregular and long-term savings were also forever. 

Probably the only reason that I listened to what the article had to say was because I started doing some calculations of how long it would take to save up three months of committed expenses with varying levels of committed expenses.  The results of that exercise are a real eye-opener.