Comments on: Some Thoughts On The 60% Solution http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/ Simple, applicable personal finance advice for the modern world Fri, 10 Feb 2012 03:55:09 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Fawn http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-926388 Fawn Sun, 03 Oct 2010 18:57:35 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-926388 This is a great idea. I will work on that once I get my debt paid off. Right now I bring home $1,000 per month. I pay $300 in rent, $350 to debts and $54 in car insurance. That comes out to be over 70% of my income, and that doesn't include gas, food, or any other expenses. It will be tight for a while, but worth it! ;) This is a great idea. I will work on that once I get my debt paid off. Right now I bring home $1,000 per month. I pay $300 in rent, $350 to debts and $54 in car insurance. That comes out to be over 70% of my income, and that doesn’t include gas, food, or any other expenses. It will be tight for a while, but worth it! ;)

]]> By: Mike http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-735237 Mike Thu, 23 Jul 2009 16:42:09 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-735237 I came across this site and wanted to mention that I don't understand the methodology of the 60% solution. There are five categories: Committed expenses Retirement savings Long-term savings ST Savings Fun money Where does Debt go? I have a lot and should this be mixed in with committed expenses? Where does an Roth IRA go (after tax retirement, I assume Retirement savings but contributions are quite liquid). If so, my retirement savings is like 30% which throws a wrench in my % of ST and LT savings. Regarding post #1, what is 60-10-20-10 allocation? An interesting concept though. I came across this site and wanted to mention that I don’t understand the methodology of the 60% solution.

There are five categories:
Committed expenses
Retirement savings
Long-term savings
ST Savings
Fun money

Where does Debt go? I have a lot and should this be mixed in with committed expenses? Where does an Roth IRA go (after tax retirement, I assume Retirement savings but contributions are quite liquid). If so, my retirement savings is like 30% which throws a wrench in my % of ST and LT savings. Regarding post #1, what is 60-10-20-10 allocation?

An interesting concept though.

]]> By: Don http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-416292 Don Thu, 13 Nov 2008 23:59:43 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-416292 Regarding comment #14: How can you be in a 40% tax bracket? At 100K AGI you would be in the 28% marginal tax bracket. That should give you an effective tax rate of around 22%. Add in FICA and you are approaching 30%. I don't know of any state that would have an 10% effective rate. I don't even know if there are any with that high of marginal rate. You would need an that high of rate to approach 40% Regarding comment #14: How can you be in a 40% tax bracket? At 100K AGI you would be in the 28% marginal tax bracket. That should give you an effective tax rate of around 22%. Add in FICA and you are approaching 30%. I don’t know of any state that would have an 10% effective rate. I don’t even know if there are any with that high of marginal rate. You would need an that high of rate to approach 40%

]]> By: Colin http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-394455 Colin Wed, 15 Oct 2008 12:23:00 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-394455 To Crystal: I have the same issue with being paid every 2 weeks. What I do is figure out what I would be paid if it was bi-monthly (take your net take home pay, multiply by 26, then divide that amount by 24). I then have my wages direct deposited into a savings account with a linked checking account and set up automatic transfers on the 1st and 15th of each month but I set the transfer amount to the BI_MONTHLY amount you figured out earlier. The only caveat to this is that you have to have a little extra money in your savings account to start off as you will be drawing more than you are paid for the first x amount of months until the one month comes when you are paid 3 times in that month, then that extra becomes the 'float' and is automatically distributed over time with the regular transfers. Hope this idea helps. To Crystal:
I have the same issue with being paid every 2 weeks. What I do is figure out what I would be paid if it was bi-monthly (take your net take home pay, multiply by 26, then divide that amount by 24). I then have my wages direct deposited into a savings account with a linked checking account and set up automatic transfers on the 1st and 15th of each month but I set the transfer amount to the BI_MONTHLY amount you figured out earlier. The only caveat to this is that you have to have a little extra money in your savings account to start off as you will be drawing more than you are paid for the first x amount of months until the one month comes when you are paid 3 times in that month, then that extra becomes the ‘float’ and is automatically distributed over time with the regular transfers.
Hope this idea helps.

]]> By: Crystal http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-370688 Crystal Mon, 08 Sep 2008 15:57:19 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-370688 I am racking my brain on settting this 60% solution up for us (although we have to start at 70%) but am struggling with the issue with getting paid every 2 weeks. That means that we get 26 paychecks instead of just 24. If I calculate it as 24 paychecks, making it a consistent flow of income for all 12 months, the amount is about $500 higher than what really comes in every month. Of course we have 2 "extra" paychecks a year, but not right away. What is the best way to deal with this when you are trying to figure out the most accurate way to spend your money every month and consistently put money into savings? I am racking my brain on settting this 60% solution up for us (although we have to start at 70%) but am struggling with the issue with getting paid every 2 weeks. That means that we get 26 paychecks instead of just 24. If I calculate it as 24 paychecks, making it a consistent flow of income for all 12 months, the amount is about $500 higher than what really comes in every month. Of course we have 2 “extra” paychecks a year, but not right away. What is the best way to deal with this when you are trying to figure out the most accurate way to spend your money every month and consistently put money into savings?

]]> By: Kai http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-306040 Kai Tue, 17 Jun 2008 23:20:33 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-306040 @Gary, if you're still lost out there- With a high tax bracket, maybe looking at it that way is not the best, but even after taxes, you should be able to achieve it. How can a person pay everything within $1800? This is an almost offensive question. I, for one, make about half that in take-home pay - and I'm not alone - or in debt. The fact is, you have ridiculous expenses, that you seem to believe are required. $1700/month rent? For a single person? What on earth are you renting?? Downgrade - either a smaller apartment (I can't believe you're in a 1-bedroom for $1700), or take on a roommate and halve it. $800/month in food? You're simply making excuses for yourself here. No-one 'has time to cook'. they make time. Learning to cook large meals and tupperware them for the week is great - devote Sunday evening every week to food prep, and you'll have time to cook (read reheat, or toss on the toppings) all week. Cable and cell phone aren't normally utilities, but whatever - why do you have HD cable? (not having watched tv in years, I don't actually know what this is, or if you pay more for it than regular cable) or even cable? Surely you don't have time to watch TV. If you have time to watch TV, it's time to stop - save yourself the cable payments, and spend the time cooking instead - double savings! @Gary, if you’re still lost out there-
With a high tax bracket, maybe looking at it that way is not the best, but even after taxes, you should be able to achieve it.
How can a person pay everything within $1800? This is an almost offensive question. I, for one, make about half that in take-home pay – and I’m not alone – or in debt.
The fact is, you have ridiculous expenses, that you seem to believe are required.

$1700/month rent? For a single person? What on earth are you renting?? Downgrade – either a smaller apartment (I can’t believe you’re in a 1-bedroom for $1700), or take on a roommate and halve it.
$800/month in food? You’re simply making excuses for yourself here. No-one ‘has time to cook’. they make time. Learning to cook large meals and tupperware them for the week is great – devote Sunday evening every week to food prep, and you’ll have time to cook (read reheat, or toss on the toppings) all week.
Cable and cell phone aren’t normally utilities, but whatever – why do you have HD cable? (not having watched tv in years, I don’t actually know what this is, or if you pay more for it than regular cable) or even cable? Surely you don’t have time to watch TV. If you have time to watch TV, it’s time to stop – save yourself the cable payments, and spend the time cooking instead – double savings!

]]> By: Christine http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-299592 Christine Mon, 09 Jun 2008 20:28:42 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-299592 Gary, I think you might be missing the point. The point of the 60% solution is to help you budget and be more aware of HOW you're spending, based on your gross income. If this article has made you realize that even while making over 100k, you're still over-spending, it's done its job. If your complaint is that your rent is too high, you might need a place with lower rent (I live in NYC on 30k per year - so, I understand the difficulty in that). If you are spending $800/per month on eating out, maybe you need to compromise and eat in a few more nights than you are. The point of this budget is to help you delegate certain percentages to specific areas of your life. It will not be uniform for everyone and you can mold it to fit your lifestyle, but it may also force you to mold your lifestyle to fit your budget. Map it out on a spreadsheet and give it a shot. See how much you SHOULD be spending according to the 60% Solution and compare it to how much you ARE spending and see if there are ways you can get those two numbers to be closer together. Good luck! Gary,
I think you might be missing the point. The point of the 60% solution is to help you budget and be more aware of HOW you’re spending, based on your gross income.
If this article has made you realize that even while making over 100k, you’re still over-spending, it’s done its job.
If your complaint is that your rent is too high, you might need a place with lower rent (I live in NYC on 30k per year – so, I understand the difficulty in that). If you are spending $800/per month on eating out, maybe you need to compromise and eat in a few more nights than you are.
The point of this budget is to help you delegate certain percentages to specific areas of your life. It will not be uniform for everyone and you can mold it to fit your lifestyle, but it may also force you to mold your lifestyle to fit your budget.

Map it out on a spreadsheet and give it a shot. See how much you SHOULD be spending according to the 60% Solution and compare it to how much you ARE spending and see if there are ways you can get those two numbers to be closer together.

Good luck!

]]> By: gary http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-255244 gary Sun, 27 Apr 2008 19:59:55 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-255244 It is impossible for someone who is in 40% tax bracket... I make a bit more than 100k and am having a HARD time keeping my monthly expense in budget... First of all, tax will take 40% of my gross income, then I will only have 20% left which is $1800. How can a person pay every thing (food, rent, insurance, utilities) within $1800??? First of all, where I live, the rent is $1700 a month. I live alone and don't have a family or parents. Second, food is at least $800 a month. I don't have time to cook. Utilities are easily $300: HD cable, electricity, cell phone. Gas: It's easily $300+ now days. Car insurance and car payment: $1200 I really need some help and a more realistic budget solution. It is impossible for someone who is in 40% tax bracket… I make a bit more than 100k and am having a HARD time keeping my monthly expense in budget…
First of all, tax will take 40% of my gross income, then I will only have 20% left which is $1800. How can a person pay every thing (food, rent, insurance, utilities) within $1800???
First of all, where I live, the rent is $1700 a month. I live alone and don’t have a family or parents.
Second, food is at least $800 a month. I don’t have time to cook.
Utilities are easily $300: HD cable, electricity, cell phone.
Gas: It’s easily $300+ now days.
Car insurance and car payment: $1200

I really need some help and a more realistic budget solution.

]]> By: Minimum Wage http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-34322 Minimum Wage Tue, 12 Jun 2007 22:30:19 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-34322 Unrealistic for those of us earning minimum wage. Unrealistic for those of us earning minimum wage.

]]> By: Beth http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-34282 Beth Tue, 12 Jun 2007 20:33:49 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-34282 J.T. - good points. I guess I'll have to suck it up and do the math based on my gross! J.T. – good points. I guess I’ll have to suck it up and do the math based on my gross!

]]> By: pete http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-34046 pete Tue, 12 Jun 2007 04:16:25 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-34046 hi, this is about your article on msn money about retiring at 40: i really like what you're doing here, but as a social scientist and a stats prof i'd estimate there's only about a 16% chance you can count on that 12% annualized return (based on the 20-year time horizons over the history of the S&P at sites like this one: http://www.moneychimp.com/articles/randomness/time_horizon.htm if you want more details please just drop me an e-mail at my listed e-mail -- sorry to post here but i couldn't find anywhere else -- thanks and good luck! pete hi,

this is about your article on msn money about retiring at 40: i really like what you’re doing here, but as a social scientist and a stats prof i’d estimate there’s only about a 16% chance you can count on that 12% annualized return (based on the 20-year time horizons over the history of the S&P at sites like this one:

http://www.moneychimp.com/articles/randomness/time_horizon.htm

if you want more details please just drop me an e-mail at my listed e-mail — sorry to post here but i couldn’t find anywhere else — thanks and good luck!

pete

]]> By: BigBuddha http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-34027 BigBuddha Tue, 12 Jun 2007 02:10:26 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-34027 the 60% solution is a great way to set up a quick and dirty budgeting system. It doesn't take a great deal to monitor and provides for some "spend" money which is important I think once you've got your non-tax deductible debt undercontrol. the 60% solution is a great way to set up a quick and dirty budgeting system.

It doesn’t take a great deal to monitor and provides for some “spend” money which is important I think once you’ve got your non-tax deductible debt undercontrol.

]]> By: J.T. http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-33995 J.T. Mon, 11 Jun 2007 23:29:37 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-33995 Beth, it would be difficult to come up with any meaningful guidelines for take-home pay since everyone's circumstances are different. Just the difference between someone with a workplace retirement savings plan and someone without can be a significant amount. Add in insurance premiums, health savings accounts, employee stock purchases, etc., and the numbers become even more difficult. And that's not even taking into consideration independent contractors, jobs where most money comes from tips, the self-employed, or any other number of unusual circumstances. As an added bonus, thinking of your paycheck as a gross rather than net number may make people more sensitive to where their tax and retirement dollars are going. That's never a bad thing. Beth, it would be difficult to come up with any meaningful guidelines for take-home pay since everyone’s circumstances are different. Just the difference between someone with a workplace retirement savings plan and someone without can be a significant amount. Add in insurance premiums, health savings accounts, employee stock purchases, etc., and the numbers become even more difficult. And that’s not even taking into consideration independent contractors, jobs where most money comes from tips, the self-employed, or any other number of unusual circumstances.

As an added bonus, thinking of your paycheck as a gross rather than net number may make people more sensitive to where their tax and retirement dollars are going. That’s never a bad thing.

]]> By: Beth http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-33970 Beth Mon, 11 Jun 2007 22:28:31 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-33970 I wish these rules of thumb would work with our take-home; those numbers are much more meaningful to me. In my case, after taxes and retirement savings, my take-home is 66% of my gross. My committed expenses (including extra debt pay-down) are 55% of my take-home - BUT I do not put food or clothing in there. I'm just now starting to benefit from paying off my credit card, so I guess I'll see how I can apply this rule of thumb to my situation: I'm thinking I'll do 25% of my take home as day-to-day spending (including food & clothes), 10% long-term savings, and 10% emergency fund (then other short-term savings). But oh how I wish someone (*cough*Trent*cough*) would write a rule of thumb for take-home divvying. I wish these rules of thumb would work with our take-home; those numbers are much more meaningful to me. In my case, after taxes and retirement savings, my take-home is 66% of my gross.

My committed expenses (including extra debt pay-down) are 55% of my take-home – BUT I do not put food or clothing in there. I’m just now starting to benefit from paying off my credit card, so I guess I’ll see how I can apply this rule of thumb to my situation: I’m thinking I’ll do 25% of my take home as day-to-day spending (including food & clothes), 10% long-term savings, and 10% emergency fund (then other short-term savings).

But oh how I wish someone (*cough*Trent*cough*) would write a rule of thumb for take-home divvying.

]]> By: r http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-33959 r Mon, 11 Jun 2007 21:10:30 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-33959 There's no mention of charitable giving in this discussion at all, atlhough it's one of the things I think of as coming up any time I breakdown my money allocation by percentages. I guess it's just an unlisted part of the "committed expenses" part, but I wish it were listed directly...! There’s no mention of charitable giving in this discussion at all, atlhough it’s one of the things I think of as coming up any time I breakdown my money allocation by percentages. I guess it’s just an unlisted part of the “committed expenses” part, but I wish it were listed directly…!

]]> By: Felis http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-33940 Felis Mon, 11 Jun 2007 20:06:56 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-33940 Ok, this guideline makes me feel really good. We've been aggressively paying down our debt, and for a while the thrill of watching the numbers was enough to sustain a frugal life... Lately though, it's been tough. The "end" is only 5 1/2 months away but it's starting to wear on my nerves living on such a tight budget for the last year and a half. According to this rule though, we are living on 44%!!! The rest is going to paying off the debt and savings. No wonder it hurts! We're kicking butt! :-) Thanks for the great blog! Ok, this guideline makes me feel really good. We’ve been aggressively paying down our debt, and for a while the thrill of watching the numbers was enough to sustain a frugal life… Lately though, it’s been tough. The “end” is only 5 1/2 months away but it’s starting to wear on my nerves living on such a tight budget for the last year and a half. According to this rule though, we are living on 44%!!! The rest is going to paying off the debt and savings. No wonder it hurts! We’re kicking butt! :-) Thanks for the great blog!

]]> By: dwlt http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-33935 dwlt Mon, 11 Jun 2007 19:43:33 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-33935 Thanks Rick - the 18 month fund is mentioned in the last sentence of the second last paragraph. Thanks Rick – the 18 month fund is mentioned in the last sentence of the second last paragraph.

]]> By: Rick http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-33932 Rick Mon, 11 Jun 2007 19:28:26 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-33932 I'm not sure that I like keeping one's emergency savings in Microsoft stock (or any one company stock, for that matter), but the rest sounds like a good goal to have. dwlt: I'm not sure where Trent said he wants an 18 month emergency fund, but I do recall him saying a good strategy is 2 months for every person in your household. Since, once the baby is born, he will have four people in his household, I'd imagine he wants an 8-month emergency fund (of expenses, not income). I’m not sure that I like keeping one’s emergency savings in Microsoft stock (or any one company stock, for that matter), but the rest sounds like a good goal to have.

dwlt: I’m not sure where Trent said he wants an 18 month emergency fund, but I do recall him saying a good strategy is 2 months for every person in your household. Since, once the baby is born, he will have four people in his household, I’d imagine he wants an 8-month emergency fund (of expenses, not income).

]]> By: dwlt http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-33926 dwlt Mon, 11 Jun 2007 19:11:57 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-33926 You may have covered this elsewhere and I missed it, but may I ask why you're aiming for an 18 month emergency fund? Also, I assume that's 18 months of expenses rather than 18 months of income? You may have covered this elsewhere and I missed it, but may I ask why you’re aiming for an 18 month emergency fund?

Also, I assume that’s 18 months of expenses rather than 18 months of income?

]]> By: Ericka http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/comment-page-1/#comment-33925 Ericka Mon, 11 Jun 2007 19:05:13 +0000 http://www.thesimpledollar.com/2007/06/11/some-thoughts-on-the-60-solution/#comment-33925 This sounds like a great idea. My concern is being able to do this since my income can fluctuate 5-10% in any given month. Love your site! I'm working very hard to get my dollars and cents under control and out from under a pile of debt, and your posts have given me some fantastic ideas. This sounds like a great idea. My concern is being able to do this since my income can fluctuate 5-10% in any given month.

Love your site! I’m working very hard to get my dollars and cents under control and out from under a pile of debt, and your posts have given me some fantastic ideas.

]]>