The 60% Solution - A Simple Budgeting Method for Managing Your Money

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2023-04-30 - 21:54

Budgeting can be a daunting task, especially if you're not sure where to start or which method to use. With so many options available, it's hard to know which one will work best for you and your specific financial situation. That's why we're here to explore one popular method that's been gaining attention in recent years: the 60% solution.

Created by Richard Jenkins, former editor-in-chief of MSN Money, the 60% solution is a budgeting method designed to simplify the process of managing your finances. It's based on the idea that you should divide your income into three categories: needs, wants, and savings.

According to Jenkins, you should aim to spend no more than 60% of your after-tax income on your needs, such as housing, food, transportation, and other essential expenses. The remaining 40% should be split evenly between wants, such as entertainment and dining out, and savings for the future.

But does this method work for everyone? Who is it best suited for, and why might it fail? These are important questions to consider before deciding whether to adopt the 60% solution as your budgeting method of choice.

In this blog, we'll delve deeper into the details of this method, examining its pros and cons, and exploring whether it's right for you. So, whether you're a budgeting newbie or a seasoned pro, read on to discover everything you need to know about the 60% solution.

What is the 60% solution?

The 60% solution is a budgeting method created by Richard Jenkins, a former editor-in-chief at MSN Money. The concept is simple: allocate 60% of your gross income to committed expenses, including bills and taxes, and divide the remaining 40% into four categories: retirement savings, long-term savings, short-term savings, and funds for everyday expenses.

By allocating 60% of your income to committed expenses, you can ensure that your bills and taxes are always covered, regardless of any unexpected expenses or changes in your income. This can help prevent overspending and falling into debt.

The remaining 40% is divided equally among four categories, each with its own purpose. The retirement savings category is for long-term investments that will help you achieve financial independence in the future.

The long-term savings category is for big purchases, such as a down payment on a house or a new car. The short-term savings category is for more immediate expenses, such as a vacation or a new laptop. Finally, the funds category is for everyday expenses, such as groceries and entertainment.

The idea behind the 60% solution is to simplify the budgeting process and make it easier to stick to a plan. By allocating a set percentage of your income to each category, you can avoid the stress and confusion of trying to figure out how much money you should be spending on each expense.

Overall, the 60% solution can be an effective budgeting method for those who want to simplify their finances and ensure that they are always living within their means. However, it may not work for everyone, and there are some potential drawbacks to consider. We'll explore who the 60% solution works best for and why it may fail in the next sections.

Who should use the 60% solution?

who would benefit the most from using the 60% solution? Well, it's best for those who tend to overspend on big-ticket items like cars, homes, or even vacations. By allocating 60% of their gross income to committed expenses, they have a clear understanding of how much they can realistically spend on these larger purchases without getting into debt.

However, if you're someone who struggles with impulse buying, the 60% solution might not work as well for you. It becomes harder to keep your committed expenses near 60% when you're constantly making spur-of-the-moment purchases. That being said, it's important to note that the 60% can be adjusted higher or lower depending on your individual situation.

It's also worth mentioning that the 60% solution is not just for those with a low income. In fact, higher earners may find the 60% solution to be particularly useful as they may have a tendency to overspend without a clear understanding of where their money is going.

Overall, the 60% solution can work for a wide range of people. As long as you're willing to make a conscious effort to stick to your budget and limit your spending on impulse buys, it's worth considering giving the 60% solution a try.

Why the 60% solution may fail?

As with any budgeting method, the 60% solution may not work for everyone. One reason it may fail is if overspending occurs in any of the categories. It's important to remember that regardless of the budgeting method, overspending can lead to debt.

Another reason the 60% solution may not work for some is if their committed expenses exceed 60% of their income. In this case, they would have to reduce the amounts allocated to other categories to compensate. This can be challenging if they have already committed to certain savings goals.

Those who struggle with impulse buying or have irregular income may also have difficulty maintaining the 60% goal. For example, if someone has a tendency to make impulse purchases, it may be harder for them to keep their committed expenses near 60%. Similarly, those with irregular income may find it challenging to consistently allocate 60% of their income towards committed expenses.

It's important to note that Richard Jenkins, the creator of the 60% solution, acknowledges that the 60% can be adjusted based on an individual's situation. This means that the 60% may not be suitable for everyone and may need to be adjusted higher or lower based on their unique circumstances.

The 60% solution can be a helpful budgeting method for those who struggle with overspending on big expenses and have control over impulse buys. However, it may not be suitable for those who have committed expenses that exceed 60% of their income or struggle with impulse buying or irregular income. It's important to find a budgeting method that works best for your individual situation and to make adjustments as needed.


In conclusion, the 60% solution is a budgeting method that can be helpful for individuals looking to prioritize their expenses and save for the future. By allocating 60% of gross income to committed expenses and dividing the remaining 40% into different categories, this method aims to prevent overspending and debt. However, it may not be the best fit for everyone, especially for those who struggle with impulse buying or have irregular income.

Despite its potential benefits, overspending in any category can lead to debt, regardless of the budgeting method used. It's important to remember that the 60% solution can be adjusted to fit individual situations, and that the ultimate goal of any budgeting method is to prevent overspending and avoid debt.

If you're someone who tends to overspend on big expenses like cars or homes, and have control over impulse buys, the 60% solution may be a good fit for you. On the other hand, if you're someone who frequently gives in to impulse buying, it may be more difficult to maintain the 60% goal. In any case, it's important to be aware of your spending habits and adjust your budgeting method accordingly.

At the end of the day, the key to budgeting success is finding a method that works for you and sticking to it. Whether it's the 60% solution or another budgeting method, the most important thing is to prioritize your expenses, save for the future, and avoid overspending and debt.