How to Save Using the 60% Solution

There are a number of us who think that budgeting is a complete waste of time considering how our expenditure always seems to get ahead of how much we actually earn.

However, contrary to popular opinion, it isn’t the small things you spend money on that causes damage but actually the big irregular payments that you have to make and which include repairs, going on vacations as well as the big payments such as buying a car or the downpayment for a new home.

The key to managing your finances has a lot to do with managing these expenses and for that, it’s important to handle your fixed monthly expenses.

No matter what you’ve heard in the past, a simple solution to get ahead of your finances is to adopt the 60% solution.

This simply means that you keep your committed expenses at or below 60% so as to handle the irregular and big payments as well. Some of these monthly expenses include basic food and clothing spendings, household expenditure, insurance premium, bills as well as taxes too.

(Now the 60% isn’t a fixed value – your expenditure might hover around this figure or amount to even more. It’s still important to establish this figure.)

After you arrive at this figure, divided the remaining chunk into four parts (ideally 10% each): retirement savings, long-term savings, short-term savings for irregular expenses and fun money.

Once you do this, it should be easy to stay ahead when it comes to the big two expenses mentioned earlier, and stay in the green when it comes to your finances in general.