The 60% Solution?

Budgeting is one of the most effective tools to take control of your finances, yet many people struggle to find a method that feels manageable and fits their lifestyle. That’s where the 60% Budgeting Method comes in.

It’s a straightforward way to organise your spending, savings, and financial goals without getting bogged down in overly complex details.

This method prioritises simplicity and balance, dividing your income into just five key categories: committed expenses, retirement savings, short-term savings, fun, and other financial goals. By focusing on these broad areas, it provides enough structure to keep you on track while offering the flexibility to suit your unique needs.

For people in the UK, where the cost of living and financial pressures are high, a budgeting method like this can be particularly appealing. Whether you’re looking to save for a comfortable retirement, pay down debt, or simply stop feeling overwhelmed by bills, the 60% Solution could be the budgeting strategy you’ve been looking for.

In this article, we’ll explore how the method works, the thinking behind it, and who it’s best suited for. We’ll also look at its advantages and potential pitfalls, helping you decide whether this approach is the right fit for your financial journey.

What is the 60% Budgeting Method?

The 60% Budgeting Method is a simple framework designed to help you allocate your income in a way that covers your essential needs while ensuring you save for the future and enjoy life in the present. It divides your after-tax income into five distinct categories:

1. 60% for committed expenses
   This includes all your regular and essential costs, such as:
   • Housing (rent or mortgage payments)
   • Utilities (gas, electricity, water)
   • Groceries
   • Insurance premiums
   • Transportation costs
   • Minimum debt repayments

   These are the “must-pays” in your life – things you can’t avoid and need to keep running smoothly.

2. 10% for retirement savings
   Set aside a portion of your income to build a secure future. This might go into a workplace pension, a personal pension scheme, or a Lifetime ISA (LISA) for retirement.
3. 10% for short-term savings
   This covers your rainy-day fund or savings for upcoming expenses like a holiday, a new appliance, or car repairs. Having this pot of money helps you avoid dipping into credit or disrupting your long-term savings plans. Its a good idea to build up an Emergency Fund first though – see our article The Importance of an Emergency Fund for more!
4. 10% for fun
   Life isn’t just about bills and savings – you deserve to enjoy yourself! This category is for entertainment, hobbies, dining out, and other activities that bring joy to your life. Spending guilt-free here is a key part of the 60% Solution.
5. 10% for other financial goals
   This final slice is reserved for goals that don’t fit into the other categories. Examples include paying off debts faster, saving for education, donating to charity, or investing in personal growth like courses or certifications.

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Why 60% for Committed Expenses?
The cornerstone of this method is keeping your essential costs within 60% of your income. This ensures you have enough left over to save and enjoy life without living paycheck to paycheck. While this percentage might seem high, especially for those living in expensive cities like London, it encourages you to evaluate your spending critically and make adjustments where possible.

The beauty of the 60% Solution is its flexibility. If your situation doesn’t perfectly fit the model, you can tweak the percentages slightly to suit your needs. For example, if your housing costs push your committed expenses to 65%, you might reduce your “fun” allocation to 5%. Do remember though, that not enjoying your life on a budget could well lead to you abandoning it – explore our articles on Frugal Living to learn how to thrive on a budget!

The key is to stay within the general structure to maintain balance.

This approach works because it simplifies financial planning, focusing on big-picture priorities rather than obsessing over every penny spent. It’s particularly effective for those who want a manageable system to budget without feeling overwhelmed.

Next, we’ll explore the thinking behind the 60% Solution and how it can help you achieve financial stability.

The Theory Behind the 60% Rule

The 60% Rule is built on the idea that a successful budget doesn’t have to be overly complicated to work. By focusing on just five broad categories, it simplifies the process of managing money while ensuring you address both your present needs and future goals.

This section explores the logic and psychology behind the method, as well as its practical benefits.

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Balancing Necessities with Financial Goals

At its core, the 60% Rule encourages you to focus on what’s truly important: covering your essential expenses while leaving room for saving and enjoyment. The thinking is simple:

• By allocating 60% to committed expenses, you ensure that your basic needs and essential bills are met without compromise.
• The remaining 40% is split evenly across savings, fun, and other financial goals, creating a well-rounded approach that prioritises both security and happiness.

This balance helps prevent overspending on non-essentials while making sure you don’t feel deprived.

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Psychological Benefits: Clarity and Control

Money stress often comes from feeling out of control. A budget like the 60% Rule provides clarity by dividing your income into clear, manageable portions. Knowing exactly how much you can spend in each area reduces anxiety and helps you make decisions with confidence.

Additionally, the method eliminates the need for meticulous tracking of every expense. Instead of obsessing over small purchases, you focus on sticking to the big-picture percentages. This makes the process less tedious and more sustainable over time.

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A Focus on Saving

One of the standout features of the 60% Solution is its emphasis on saving. With 20% of your income dedicated to savings, split between short-term needs and retirement, this budgeting method ensures you’re building a financial cushion for the future. It’s especially helpful for those who struggle to save consistently, as it creates a non-negotiable habit.

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Encouraging Responsible Spending

Allocating 10% of your income to “fun” spending is a deliberate choice in this method. It acknowledges that we all need to enjoy life, and by setting boundaries, it allows you to indulge without guilt. At the same time, the structure prevents overspending on luxuries at the expense of essentials or savings.

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Adaptability for Real Life

The 60% Rule is designed to be flexible, which is key to its effectiveness. While the percentages are a guideline, they can be adjusted slightly to fit your individual circumstances. For example:

• If you’re repaying debt, you might shift some of the “fun” or “other goals” allocation toward extra repayments.
• If housing costs exceed the 60% allocation, you can look for savings in other areas until your situation improves.

This adaptability makes the method practical for a variety of lifestyles, from single professionals to families managing childcare costs.

Inspiration from Simplicity

The 60% Solution takes inspiration from other minimalist budgeting methods, such as the 50/30/20 Rule, but its slightly different allocation makes it uniquely effective for those who want to prioritise essential expenses. Its simplicity is particularly appealing for people who find detailed tracking systems like zero-based budgeting too demanding.

By focusing on the “big picture” rather than granular details, the 60% Rule offers a sustainable, stress-free approach to budgeting – one that’s especially relevant in today’s fast-paced world.

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Next, we’ll get into the advantages of the 60% Solution, exploring why this method might be the perfect fit for you.

Advantages of the 60% Solution

The 60% Solution Budgeting Method has gained popularity for good reason. Its simple yet effective structure offers several advantages, making it an appealing option for a wide range of people. Here’s why this approach might work for you:

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1. Easy to Understand and Implement

One of the biggest strengths of the 60% Solution is its simplicity. Unlike detailed budgeting systems that require meticulous tracking of every purchase, this method focuses on just five broad categories. All you need to do is allocate your after-tax income based on percentages and stick to the plan.

• Why it works: Simplicity reduces the mental barrier to getting started. If traditional budgeting feels overwhelming, the 60% Solution provides a refreshing alternative.

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2. Encourages Financial Discipline

By assigning fixed percentages to savings, fun, and other goals, the method ensures you develop good financial habits. You’re less likely to overspend on discretionary items because your budget sets clear boundaries.

• Key takeaway: You’re training yourself to prioritise essentials and savings, creating a disciplined approach to money management without feeling restricted.

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3. Built-in Flexibility

Life doesn’t always go to plan, and this budgeting method acknowledges that. While the core idea is to stick to the 60/10/10/10/10 split, you can tweak the percentages slightly to accommodate personal circumstances.

For example:

• If your housing costs push committed expenses to 65%, you might reduce your “fun” budget to 5%.
• If you’re focusing on paying down debt, you could reallocate the “other financial goals” category.

This flexibility makes the 60% Solution adaptable to different life stages and income levels.

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4. Promotes Savings Without Sacrifice

With 20% of your income earmarked for savings, the method ensures you’re building both a short-term safety net and long-term wealth. Unlike methods that focus solely on spending restrictions, the 60% Solution makes saving a natural part of your budget.

• Short-term savings: Provides a buffer for emergencies or big purchases, reducing reliance on credit.
• Retirement savings: Helps you secure your future by consistently contributing to pensions or investment accounts.

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5. Encourages Guilt-free Spending

Many people feel guilty about spending money on non-essentials, but the 60% Solution eliminates this problem. By allocating 10% of your income for “fun,” you’re giving yourself permission to enjoy life without jeopardising your financial health.

• Example spending: Dining out, hobbies, holidays, or tickets to events. Knowing you have a set budget for these activities makes indulgences feel intentional and well-earned.

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6. Ideal for Beginners

If you’re new to budgeting, the 60% Solution offers a straightforward starting point. It doesn’t require spreadsheets or budgeting apps, though you can use them if you like. This simplicity makes it less intimidating and more likely to stick.

7. Helps with Long-term Planning

The 60% Solution ensures you’re balancing your immediate needs with future goals. Whether you’re saving for a comfortable retirement, paying off debt, or building an emergency fund, this method keeps you focused on the bigger picture.

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8. Works for a Range of Incomes

While not perfect for every scenario, the 60% Solution can be adapted for many income levels. Whether you’re a single professional, a couple with children, or even self-employed, the method’s broad categories offer enough flexibility to make it work.

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In Summary:
The 60% Solution combines structure, simplicity, and flexibility, making it an excellent choice for people looking to manage their money without the stress of detailed tracking. It’s particularly useful for those who want to save consistently while still enjoying life’s pleasures.

Pitfalls to Watch Out For

While the 60% Budgeting Method has many benefits, no budgeting strategy is without its challenges. It’s important to consider the potential drawbacks to decide if this method is the right fit for your financial situation.

Here are some common pitfalls to watch out for when using the 60% Solution:

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1. High Housing Costs Can Skew the Budget

In the UK, housing costs can take up a significant portion of your income, especially in cities like London, Manchester, or Edinburgh. If your rent or mortgage pushes your committed expenses well beyond 60%, it might be difficult to stick to this budget.

• Solution: Adjust the percentages to fit your reality. For instance, allocate 65% or 70% for committed expenses while reducing other categories temporarily.

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2. Irregular Incomes Can Cause Fluctuations

For freelancers, self-employed individuals, or those on zero-hour contracts, income can vary month to month. This variability can make it tricky to allocate fixed percentages.

• Solution: Use your average monthly income or create a buffer fund during high-income months to cover shortfalls in leaner periods.

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3. Risk of Overestimating Discretionary Spending

If your estimates for “fun” or “other financial goals” are too generous, you might find yourself dipping into savings or struggling to cover committed expenses.

• Solution: Track your spending for a few months to get a realistic sense of your needs. Adjust allocations based on your actual financial habits.

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4. Doesn’t Suit Highly Detailed Planners

If you’re someone who enjoys tracking every penny and having precise control over your finances, the 60% Solution might feel too broad. It’s not designed for those who prefer granular budgeting.

• Alternative: Consider a method like zero-based budgeting, which allocates every pound to a specific purpose.

5. Limited Flexibility for Specific Financial Goals

While the method includes a category for “other financial goals,” its broad allocations might not suit people with multiple or complex priorities, such as significant debt repayment or saving for a house deposit.

• Solution: If you have a major goal, adjust the 10% allocation for “other goals” to suit your needs or temporarily reduce spending in another category.

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6. Requires Honest Evaluation of Spending

It’s easy to underestimate certain expenses or overestimate your ability to save. For example, you might misclassify some luxury items as essentials, throwing off the balance of your budget.

• Solution: Be realistic and transparent about your spending habits. Tracking expenses for a few months can help refine your estimates.

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7. May Not Work for Those with Extreme Debt

If you’re in significant debt, the 60% Solution’s allocation for savings and fun might not provide enough flexibility to tackle your repayments aggressively.

• Alternative: Consider reallocating funds from “fun” or “short-term savings” toward debt repayment until you’re in a stronger financial position.

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8. Lacks Granularity for Advanced Budgeters

For those with complex finances or multiple streams of income, the broad categories might feel limiting. Advanced budgeters may find the method too simplistic for their needs.

• Alternative: Supplement the 60% Solution with tools like budgeting apps to track additional details.

At A Glance:

Advantages	Disadvantages
Simple and easy to understand for beginners.	May not work for those with high housing costs.
Encourages financial discipline with fixed categories.	Not ideal for people with irregular incomes.
Promotes savings without sacrificing enjoyment.	Too broad for highly detailed planners or advanced budgeters.
Flexible enough to adapt to different circumstances.	Doesn’t prioritise aggressive debt repayment.
Guilt-free spending allowance promotes a healthy mindset.	Can underestimate expenses, leading to imbalances.

In Summary:
The 60% Budgeting Method works best for people with stable incomes, manageable housing costs, and relatively straightforward financial goals. However, it might require adjustments for those with high fixed costs, irregular earnings, or significant debt.

By being aware of these pitfalls and customising the method to your circumstances, you can maximise its effectiveness.

Who Should Consider the 60% Solution?

The 60% Solution Budgeting Method isn’t a one-size-fits-all strategy, but it works exceptionally well for certain types of people and financial situations. Here’s a breakdown of who should consider adopting this budgeting method:

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1. People with Stable Incomes

This method is ideal for individuals with a consistent monthly income, such as salaried employees. The fixed percentage allocations work best when you have a predictable amount of money coming in every month.

• Why it works: A steady income makes it easier to divide your funds into the five categories and stick to them without worrying about fluctuations.

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2. Beginners to Budgeting

If you’re new to managing your finances, the simplicity of the 60% Solution makes it a great starting point. It avoids the complexity of more detailed methods like zero-based budgeting or envelope systems.

• Why it works: Broad categories are easier to handle, making this approach less intimidating for those who are just getting started.

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3. Those Seeking a Balanced Approach

This method appeals to people who want to strike a balance between saving for the future, meeting essential needs, and enjoying life. The equal 10% allocations for savings, fun, and financial goals ensure you don’t focus too heavily on one area at the expense of others.

• Why it works: It supports a holistic financial plan that prioritises both financial security and happiness.

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4. Couples or Families with Shared Finances

For households with shared expenses, the 60% Solution can simplify budget discussions by providing clear categories for spending and savings. It’s especially helpful for families with stable incomes and predictable monthly costs.

• Why it works: A shared system encourages collaboration, making it easier to allocate funds toward common goals like savings, housing, or leisure activities.

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5. Individuals Looking to Improve Savings Habits

If you’ve struggled to save money in the past, the 60% Solution offers a straightforward way to build the habit. With 20% of your income automatically allocated to retirement and short-term savings, you’re prioritising your future without overthinking it.

• Why it works: By treating savings as a fixed expense, it becomes a non-negotiable part of your budget.

6. People Who Want a Simple, Sustainable System

Some budgeting methods require extensive tracking or constant adjustments, which can feel like a chore. The 60% Solution is perfect for those who want a system that’s easy to follow and doesn’t require much maintenance.

• Why it works: By focusing on the big picture rather than every minor expense, this method is less stressful and more sustainable.

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Who Might Struggle with the 60% Solution?

While this method has broad appeal, it might not work well for everyone:

• Freelancers or people with irregular incomes: The fixed percentages may not suit those whose earnings fluctuate significantly.
• People in high-cost areas: If your housing or childcare costs exceed 60% of your income, you may find it challenging to adhere to the framework.
• Advanced budgeters: If you prefer detailed tracking or have complex financial goals, the simplicity of this method may feel too restrictive.

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In Summary:
The 60% Solution is a fantastic choice for people with stable incomes, those new to budgeting, or anyone looking for a simple yet effective way to manage their finances. It works particularly well for those who value balance, want to build savings, and prefer a system that doesn’t require constant monitoring. However, it may need adjustments for individuals with irregular incomes or high fixed costs.

How to Implement the 60% Solution

The 60% Solution Budgeting Method is straightforward to set up and follow, but like any budgeting plan, it requires a bit of effort to get started.

Here’s a step-by-step guide to help you implement this method and tailor it to your financial needs:

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Step 1: Calculate Your After-tax Income

Start by determining how much money you bring home each month after taxes and other deductions. This is your net income, and it will form the basis for dividing your budget into the five categories.

• Example: If you earn £2,500 per month after tax, this is the amount you’ll allocate.

If you’re a bit flummuxed by this step, have a read of our guide How to Assess Your Income for Budgeting!

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Step 2: Break Down Your Budget into Categories

Use the 60/10/10/10/10 split to allocate your income into the following categories:

1. Committed Expenses (60%)
   • Rent/mortgage
   • Utilities (gas, electricity, water)
   • Groceries
   • Transportation
   • Insurance premiums
   • In our example: £2,500 × 60% = £1,500 for committed expenses.
2. Retirement Savings (10%)
   • Pension contributions (e.g., workplace pension, personal pension).
   • Long-term investments (e.g., stocks and shares ISA).
   • In our example: £2,500 × 10% = £250 for retirement savings.
3. Short-term Savings (10%)
   • Emergency fund
   • Savings for a holiday, a new appliance, or car repairs.
   • In our example: £2,500 × 10% = £250 for short-term savings.
4. Fun (10%)
   • Entertainment, dining out, hobbies, and leisure activities.
   • In our example: £2,500 × 10% = £250 for fun.
5. Other Financial Goals (10%)
   • Extra debt repayments
   • Charitable donations
   • Education or personal development.
   • In our example: £2,500 × 10% = £250 for other goals.

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Step 3: Track Your Spending

For the first few months, keep a record of your spending in each category. This helps you identify areas where you’re overspending or under-allocating.

• • Use a spreadsheet or budgeting app like Emma, YNAB, or Monzo to simplify tracking.
  • Adjust as needed: If your housing costs exceed 60%, consider tweaking other categories temporarily.

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Step 4: Build a Safety Net

If you don’t already have an emergency fund, prioritise this in your short-term savings category. Aim for at least three to six months’ worth of expenses to cover unexpected events like job loss or medical emergencies.

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Step 5: Reassess Regularly

Life circumstances change, and so should your budget. Review your income, expenses, and goals every few months to ensure your allocations still align with your priorities.

Step 6: Tweak the Percentages (If Needed)

If your circumstances don’t perfectly fit the 60/10/10/10/10 model, make small adjustments:

• High housing costs? Allocate 65% for committed expenses and reduce “fun” to 5%.
• Paying off debt? Use the “other financial goals” category to accelerate repayments.

The key is to stay within the general structure while tailoring it to your life.

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In Summary:
Implementing the 60% Solution is as simple as dividing your after-tax income into five categories and tracking your spending for a few months. With a bit of planning and a willingness to adjust, you’ll find this method can bring clarity, discipline, and balance to your financial life.

Comparison with Other Budgeting Methods

The 60% Solution Budgeting Method is one of many approaches to managing your finances. Each method has its strengths and weaknesses, and the right one for you depends on your lifestyle, financial goals, and personal preferences.

Here’s how the 60% Solution compares to other popular budgeting methods:

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1. 50/30/20 Rule

• What it is:
  A widely used budgeting method that allocates:
  • 50% to needs (housing, groceries, bills).
  • 30% to wants (entertainment, dining out).
  • 20% to savings (retirement, debt repayment).
• How it compares to the 60% Solution:
  • The 60% Solution gives a more detailed breakdown of savings (split into retirement and short-term goals) and explicitly includes a category for “fun.”
  • The 50/30/20 Rule may be simpler for those who want fewer categories.
• Best for:
  People who want a high-level view of their finances without much categorisation.

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2. Zero-Based Budgeting

• What it is:
  A meticulous budgeting method where every pound of income is assigned a purpose, leaving a “zero balance” at the end of the month. You track every expense down to the last penny.
• How it compares to the 60% Solution:
  • Zero-based budgeting is more detailed and requires more effort, while the 60% Solution is simpler and focuses on broad categories.
  • The 60% Solution is better for people who don’t have time or patience for detailed tracking.
• Best for:
  Advanced budgeters or those with complex finances who want precise control.

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3. Envelope System

• What it is:
  A cash-based system where you allocate money into envelopes for different categories (e.g., groceries, bills, entertainment). Once an envelope is empty, you stop spending in that category.
• How it compares to the 60% Solution:
  • The envelope system requires physical cash and hands-on management, whereas the 60% Solution works well with digital banking and automation.
  • The 60% Solution offers more flexibility, especially for people who use debit or credit cards.
• Best for:
  People who need strict spending limits and prefer tangible budgeting tools.

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4. Pay-Yourself-First Method

• What it is:
  A savings-first approach where you prioritise saving a set percentage of your income before spending on anything else. The remainder is used for all other expenses.
• Also known as: Budgeting Backwards
• How it compares to the 60% Solution:
  • The 60% Solution includes savings as part of a balanced approach, while Pay-Yourself-First focuses almost exclusively on savings.
  • The 60% Solution may feel more sustainable for those who need to balance enjoyment with financial goals.
• Best for:
  High savers or those focused on achieving aggressive financial goals quickly.

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5. Bare Bones Budget

• What it is:
  A minimalist method where you budget only for essentials like housing, bills, and food, with no specific allocations for fun or savings.
• How it compares to the 60% Solution:
  • Needs-based budgeting may be too restrictive for people who value leisure or long-term planning.
  • The 60% Solution balances necessities with enjoyment and savings, making it a more holistic approach.
• Best for:
  People in extreme financial hardship who need to cut back on all non-essentials.

Which Method Is Right for You?

Budgeting Method	Best For	Effort Level
60% Solution	People who want a simple, balanced system with clear categories.	Low to Moderate
50/30/20 Rule	Beginners who prefer fewer categories and a broad structure.	Low
Zero-Based Budgeting	Advanced budgeters or those with complex financial needs.	High
Envelope System	Those who need strict spending limits and benefit from cash-based management.	Moderate to High
Pay-Yourself-First	High savers focused on building wealth quickly.	Low to Moderate
Needs-Based Budgeting	Individuals in financial difficulty who need to prioritise essentials above all else.	Low

In Summary:
The 60% Solution stands out for its simplicity, balance, and adaptability, making it a great option for most people, especially those with stable incomes and straightforward financial goals.

While other methods like zero-based budgeting or the envelope system may suit different needs, the 60% Solution offers a middle ground that is both manageable and effective.

Final Thoughts

The 60% Budgeting Method offers a simple, flexible, and effective way to manage your finances. By focusing on broad categories like committed expenses, savings, and fun, it provides a structured framework while leaving room for individual adaptation.

Its emphasis on balance ensures that you’re addressing both immediate needs and long-term goals, making it a great choice for many people, particularly those with stable incomes and straightforward financial priorities.

This method is especially appealing because it avoids the complexity of more detailed systems, making it manageable even for beginners. At the same time, its flexibility allows you to tweak the percentages to suit your personal circumstances, whether you’re saving for a house, tackling debt, or building an emergency fund.

For UK households, where rising costs and financial pressures are common, the 60% Solution offers a realistic and sustainable approach.

It’s not about perfection but progress—helping you take control of your finances without feeling overwhelmed.

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Next Steps

1. Start small: Calculate your after-tax income and allocate it based on the 60/10/10/10/10 framework.
2. Track and adjust: Use a budgeting app or spreadsheet to monitor your spending and make tweaks where necessary.
3. Stay consistent: The key to success with any budgeting method is sticking with it, even when life gets busy.

Remember, the best budget is one that works for you. Give the 60% Solution a try, adapt it as needed, and watch your financial confidence grow!

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If you’re ready to start budgeting or want to explore other financial strategies, check out these resources:

• MoneyHelper for budgeting tools and advice tailored to UK audiences.
• Popular budgeting apps like Monzo, Emma, or YNAB to simplify tracking and adjustments.
• Our articles on Budgeting for other methods and top tips!

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