The 60% Solution

Have you tried every which way you can think of to save money and nothing seems to work? You freeze your credit cards. You save change. You cut coupons. Budgeted every cent. But you seem to always dip into that savings until there’s nothing left.

Well, a writer for MSN Money, Richard Jenkins, has come up with a new way to save — or so he claims.

“My answer is the 60 Percent Solution, a faster and easier way to structure your budget without having to account for every penny,” Jenkins writes. Forget the typical budget. “What you’re trying to do with a budget is to prevent overspending, which ultimately leads to piling up debt. Contrary to the way most people budget, however, it rarely matters what you’re overspending on — dining out, entertainment, clothes. Who cares? It’s still debt, right?”

What throws out the typical budget, Jenkins explains, are unforeseen expenses or major purchases. “It was the large, irregular expenses — like vacations, major repairs and the holidays — that did all the damage. To avoid overspending, I had to do a better job of planning for those,” Jenkins points out. “They also can often be postponed, sometimes for years, which theoretically should give me a chance to save for them.”

So after analyzing his family’s spending patterns over a couple of years, Jenkins came up with a new savings budget that would keep “committed expenses at or below 60 percent” of gross income. After this, divide your remaining 40 percent of your income into various savings programs, putting 10 percent each into things like retirement savings, long-term savings, short-term savings for irregular expenses and fun money.

If you can’t cut down your expenses to be covered by 60 percent of your income, then look at your fixed monthly expenses and see where you can cut. Maybe your home or apartment is too expensive, or your car payment needs to be reduced. “If the problem is having champagne tastes on a beer budget, you’ll need to take a long, hard look at where the money is going and why,” explains Jenkins. “Perhaps you’re using money and things to fill a void in your life. Often, the steps needed to fill that void have little to do with money.”

What do you think of this savings plan? Is this something you could stick with?