When I was getting started this year, I was drawn to the simplicity of the 60% Solution budget which is built around the following ratios: 30% toward savings, 60% toward committed expenses, 10% for fun. This is very similar to the method described in the book All Your Worth of 20% savings, 50% committed, 30% wants.
These are really just two "two-line" budgets when you boil it down...you are deciding to "pay yourself first" either 30% or 20% depending on which budgeting method you are trying out (and I am sure there are many other permutations) and the rest has to cover all your expenses committed or fluff. Easy peasy....in theory.
This year I've been aiming for the 60% solution which is really all about saving 30% of my income. Between maxing out my 401k (15%) and catching up on maxing out my 2005 Roth (7%) - both long term savings - I need to find $637 for short term savings in order to be saving 30% total. That's felt like a stretch, but by some quirk of fate and math that is exactly what I put into savings last month.
I've been trimming bills here and there to try to get closer to that $637 every month and I feel thwarted by increases beyond my control (health insurance, natural gas) but it's a clear target. And I am finally getting the hang of paying myself first.
I hear ya on the "increases beyond your control" thing.
ReplyDeleteBut get ready -- you're going to be seeing a lot more of those in the future.
Companies are either going to increase their prices and fees, or decrease their services and benefits. I have a feeling it'll be pretty rampant in most aspects of our lives.
Way to go on the 60 percent solution. I've been intrigued by this method, too. It's always seemed really out of reach for me, but I'm realizing that I do spend about 10 percent of my income on "occasional expenses" (vacations, car and life insurance premiums once or twice a year, etc). I just don't set it aside ahead of time, but it wouldn't be too hard to start doing that.
ReplyDeleteIt's the 10 percent for long term savings that stumps me now. I'm putting aside 10 percent for retirement, but long term savings is only very occasional, when I have a windfall.
Getting in the 60 percent solution groove is a major goal for 2006, along with abandoning my quirky DIY Excel-based budget and moving into Quicken.
But I just got my Open Enrollment package in the mail, and my out-of-pocket increases only amounted to $5/pay. Natural gas, though, ouch.